Tax
Section 54F: Capital Gains Exemption on Any Other Asset
Sell a plot, buy a flat, pay no tax. The catch is a big one: you must reinvest the entire sale price, not merely the profit.
The short answer
Section 54F exempts the gain from selling ANY asset OTHER than a residential house — a plot, shares, gold, a shop — if you buy a residential house with it.
The catch, and it is a large one: you must reinvest the WHOLE net sale consideration, not just the gain.
And you must not already own more than one other residential house.
What Section 54F does
You sell something that is not a residential house — a plot of land, shares, gold, a commercial shop. You make a long term capital gain. You buy a residential house with the proceeds.
The gain can be exempt.
The policy is deliberate: the government wants to encourage people to convert other assets into a home.
The whole-sale-price problem
Under Section 54 — house to house — you reinvest the gain.
Under Section 54F — anything else to house — you must reinvest the ENTIRE NET SALE CONSIDERATION.
The difference, in numbers
You sell a plot for ₹2 crore. You bought it for ₹1.4 crore. Gain = ₹60 lakh.
- Sale consideration
- ₹2,00,00,000
- Capital gain
- ₹60,00,000
- Under Section 54 (if it were a house)
- Amount to reinvest for full exemption
- ₹60,00,000
- Under Section 54F (because it was a plot)
- Amount to reinvest for full exemption
- ₹2,00,00,000
You must put the whole ₹2 crore into the new house — including the ₹1.4 crore that was never a gain at all.
Which is why 54F often does not work in practice: people simply do not want to put every rupee of a large sale into a single house.
The one-house restriction
On the date you transfer the asset, you may own at most one other residential house — apart from the new one you are buying.
Own two already? Section 54F is not available to you. At all.
This is the condition people most often fall foul of, and it is checked. It is also a reason to think carefully before adding a second property, if you hold assets you might one day want to convert into a home under 54F.
There are further restrictions on buying or constructing additional houses within a period after claiming the exemption. If you are anywhere near this line, this is a conversation for a CA and not for a website.
Partial reinvestment — the proportionate rule
If you reinvest only part of the sale consideration, you get a proportionate exemption — not a full one up to the amount reinvested.
Reinvest half, exempt half
- Net sale consideration
- ₹2,00,00,000
- Capital gain
- ₹60,00,000
- Amount reinvested in a house
- ₹1,00,00,000 (50%)
- Proportion reinvested
- 50%
- Gain exempt
- ₹30,00,000
- Taxable gain
- ₹30,00,000
Note how this differs from Section 54, where reinvesting ₹40 lakh of a ₹60 lakh gain exempts a full ₹40 lakh. Under 54F, the exemption scales with the proportion of the sale price reinvested — a harsher test.
Section 54 vs Section 54F
| Section 54 | Section 54F | |
|---|---|---|
| What you SOLD | A residential house | Any OTHER asset — land, a plot, shares, gold, a shop, commercial property |
| What you BUY | A residential house in India | A residential house in India |
| How much you must reinvest | The capital GAIN only | The WHOLE net sale consideration — a far harder test |
| Partial reinvestment | Exempt to the extent reinvested | Proportionate exemption only — reinvest half the sale price, exempt half the gain |
| Other houses you may own | No restriction | You must not own more than ONE other residential house on the date of transfer |
| Timing — purchase | 1 year before, or 2 years after | 1 year before, or 2 years after |
| Timing — construction | Within 3 years | Within 3 years |
| Cap | ₹10 crore | ₹10 crore |
| Lock-in on the new house | 3 years | 3 years |
| CGAS deadline | Yes — by the ITR due date | Yes — by the ITR due date |
The 'whole sale consideration' requirement is what makes 54F so much harder than 54. On a Rs 2 crore sale with a Rs 60 lakh gain: Section 54 needs Rs 60 lakh reinvested. Section 54F needs the entire Rs 2 crore.
If you have not reinvested by the due date for filing your ITR, deposit the unutilised amount into a Capital Gains Account Scheme account.
Miss it, and the exemption is lost — however perfectly you buy the house afterwards.
We have written this against the current position and checked it carefully. But tax turns entirely on your specific facts: your residential status, when you bought, when you sell, which regime you are on, and what else is in your return.
Note also that the Income Tax Act, 2025 now replaces the 1961 Act, and section numbering is changing even where the substance is not. We use the familiar numbers — 54, 54F, 24(b), 80C — because those are what people search for and what CAs still say. Confirm the current section references with your accountant.
Before you sell a property, pay a CA. On a transaction this size it is the best-value fee you will ever pay, and the cost of getting it wrong runs to lakhs.
Frequently asked questions
What is Section 54F?
An exemption on long term capital gains from selling any asset OTHER than a residential house — a plot, shares, gold, a shop — provided you invest the whole net sale consideration in a residential house, and you do not already own more than one other residential house.
Do I have to reinvest the whole sale price under Section 54F?
Yes, for a full exemption — the entire net sale consideration, not just the gain. Sell a plot for Rs 2 crore with a Rs 60 lakh gain, and you must put the whole Rs 2 crore into the new house. This is what makes 54F so much harder than Section 54, which requires only the gain to be reinvested.
What happens if I only reinvest part of the sale price under 54F?
You get a proportionate exemption. Reinvest half the sale consideration and half the gain is exempt. This differs from Section 54, where reinvesting Rs 40 lakh of a Rs 60 lakh gain exempts a full Rs 40 lakh.
Can I claim 54F if I already own two houses?
No. On the date you transfer the asset you may own at most ONE other residential house, apart from the new one you are buying. Own two already and Section 54F is not available to you at all. This is the condition people most often fall foul of.
What is the difference between Section 54 and 54F?
Section 54 applies when you sell a RESIDENTIAL HOUSE and buy another — and you only need to reinvest the gain. Section 54F applies when you sell ANYTHING ELSE and buy a house — and you must reinvest the whole sale consideration, and must not own more than one other house.