Buying a house with equity gains? How Section 54F works with share sales and home loans

• Section 54F exemption applies if house is bought 1 year before or 2 years after sale.
• Exemption claimable even if house is funded by home loan, not just sale proceeds
• Section 54F can be claimed for multiple transactions, within time limits and cap.

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Many investors plan to fund their home purchase by selling long-term equity investments, while also hoping to reduce their tax outgo using Section 54F.  Today's Ask wallet Wise query breaks down how Section 54F exemption apply for long-term gains on selling non-house assets.

Ask Wallet-Wise initiative offers expert advice on matters related to personal finance and money-related queries. You can email your queries to askwalletwise@nw18.com, and we will try to get a top financial expert to address.

I am planning to buy a house and want to use the proceeds from selling my equity shares while claiming the Section 54F exemption. My questions are:

If I sell equity shares between now and the end of March 2026, can I consider the total capital gains from these sales for claiming Section 54F, even if I purchase the property this month?

If I fund the house purchase through a home loan, and I use the equity-sale proceeds to pay EMIs up to March 2026, will I still be eligible for the Section 54F benefit?

Is the Section 54F exemption on selling equity shares and investing in a house available only once, or can it be claimed in multiple years subject to Rs 10 crore cap?

Expert’s Advice: Section 54F provides an exemption to an individual or an HUF on long-term capital gains arising from the sale of any capital asset other than a residential house, provided the net sale consideration is invested in purchasing a residential house within the prescribed time limit.

If a ready-to-move-in house is purchased, it must be acquired within two years from the date of sale of the capital asset. The exemption is also available if the residential house is purchased within one year before the sale. If the taxpayer opts to build a house or buys an under-construction property, a three-year window is available for the construction to be completed.

The exemption isn’t limited to a single long-term capital gains transaction. It can be claimed for multiple transactions, provided the prescribed time limits for acquiring the residential house are met for each respective transaction that generates the long-term capital gains.

Since your planned sale of equity shares up to March 2026 falls within the permitted window of one year before the purchase of the residential house (reckoned from the date of sale of the capital asset), you should be able to claim the Section 54F exemption on equity shares sold now through March 2026.

You may also be able to claim the exemption against the house being purchased now for long-term capital gains earned in the next financial year, as well, provided those gains arise within one year of the purchase.

To claim the exemption for purchasing a residential house, it isn’t mandatory to use the exact funds received from selling the capital asset. What the law requires is that, to claim full exemption, the cost of the house should be at least equal to the net sale consideration from the capital asset.

If the investment in the house is lower than the net sale consideration, only a proportionate exemption is available under Section 54F. Therefore, even if you fund the house purchase through a home loan, you can still claim the Section 54F exemption.

Section 54F exemption can be claimed across multiple financial years and for more than one house purchase, provided that on the date you sell the capital asset for which you’re claiming the exemption, you do not own more than one residential house property.