Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
How 54F differs from 54
Section 54 applies when you sell a house; Section 54F applies when you sell any other long-term asset — shares, gold, land — and buy a house. The key difference: under 54F you must invest the entire net sale consideration, not just the gain, to exempt the whole gain.
The conditions
You buy one residential house in India (one year before or two years after the sale, or build within three years), and you should not own more than one other house at the time. Reinvest only part of the sale proceeds and the exemption is proportionate. A cap and conditions apply — confirm the current position.
A worked example
Example: you sell listed shares for ₹1 crore with a ₹40 lakh long-term gain. Invest the full ₹1 crore in a house and the entire ₹40 lakh gain is exempt; invest ₹50 lakh and roughly half is exempt. Park unspent money in the Capital Gains Account Scheme before your filing deadline. The big difference from Section 54 to remember is the amount you must reinvest: under 54F it is the whole net sale consideration, so spending part of the proceeds on something else leaves a proportionate chunk of the gain taxable. The one-other-house condition also catches people out — if you already own two homes, 54F is not available at all. Our NRI tax service can plan the reinvestment.