Section 54F Income Tax Act Benefits and Rules 2025 - Summary
Section 54F of the Income Tax Act is helpful if you’re dealing with long-term capital gains from selling assets like land, gold, or shares. This section lets you save on tax when you invest the money from the sale into a residential property. Knowing about Section 54F can help you plan your finances and manage taxes better in 2025.
Main Features of Section 54F Income Tax Act in 2025
Section 54F of the Income Tax Act, 1961, lets you avoid paying tax on long-term capital gains from selling any capital asset other than a residential house. You can get this exemption if you invest the sale money into a residential property that follows the rules. This benefit is available to individuals and Hindu Undivided Families (HUFs).
Eligibility and Conditions for Section 54F Benefits
- The capital gains should come from selling long-term assets other than residential property.
- You should invest all or part of the sale proceeds to buy or build a residential house.
- You must buy the residential property either:
- Within one year before or up to two years after the sale if you’re buying.
- Within three years after the sale if you’re building the house.
How to Claim Exemption Under Section 54F Income Tax Act
To get the exemption, individuals or HUFs need to use the sale proceeds in one of these ways:
- Buy a new residential property within one year before selling the original asset.
- Buy a new residential property within two years after selling.
- Build a residential house within three years after the sale.
How the Exempted Capital Gains Are Calculated
For example, if you sell an asset for Rs. 60,00,000 and it includes long-term capital gains of Rs. 10,00,000, and you invest all the money into a new house, the whole Rs. 10,00,000 is tax-free.
If you invest only a part of the sale money, your exemption is proportional. For example, if you invest Rs. 40,00,000 out of Rs. 60,00,000, your exemption will be:
(Rs. 40,00,000 / Rs. 60,00,000) x Rs. 10,00,000 = Rs. 6,66,667
Knowing these rules well can help you get the most from Section 54F. For detailed guidance, you can download the PDF available on our website.
