ITR filing: Turn stock market capital gains into tax-free wealth with a smart Section 54F move

Benefits of Section 54F

Made long-term gains from selling shares? Today's Ask Waller-Wise query decodes how Section 54F of the Income Tax Act lets you save tax if you reinvest wisely in a house.

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

I sold some listed shares last year and earned long-term capital gains. I am planning to buy a residential house. Can I claim exemption for such gains against the investment in the house? I already own one residential house in my name.

An individual or HUF can claim exemption under Section 54F on long-term capital gains (LTCG) from the sale or transfer of any asset (other than a residential house), if the net proceeds are invested in the purchase or construction of a residential house within the prescribed time limits. For a ready-to-move-in house, the investment must be made within two years from the date of sale. In case of self-construction or an under-construction property, construction must be completed within three years from the date of sale. Even if a residential house is purchased within one year prior to the sale, the exemption can still be claimed.

Please note that the exemption is capped at Rs 10 crore. Investments beyond this limit will not qualify for exemption under Section 54F.

If the amount required to claim the exemption is not fully utilized by the due date of filing your Income Tax Return (15th September 2025 for this year), the unutilized amount must be deposited in a bank account under the “Capital Gains Account Scheme” by that date. This ensures you remain eligible for the exemption, and the deposited amount can later be used for the purchase or construction of the house within the prescribed timelines.

Importantly, the exemption under Section 54F is available only if you do not own more than one residential house (other than the new one being acquired) on the date of sale. Since you currently own only one house apart from the one you plan to buy, you are eligible to claim the exemption under Section 54F.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.