One house, two tax breaks: How Sections 54 and 54F can both work for you

• Section 54F exemption applies to gains in subsequent years
• Claim exemptions under various sections for the same property
• No special procedure needed, just claim in your ITR for each year

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Investors often reinvest gains across multiple years while buying an under-construction home. Today's Ask Wallet Wise query decodes can exemptions under different sections be claimed for the same property?

The Ask Wallet-Wise initiative offers expert advice on 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 them.

I sold my residential property in May 2024 (FY 2024–25) and booked an under construction flat, for which the allotment letter is dated March 2025. The long-term capital gain arising from sale of the residential property amounted to Rs 33.23 lakh. The total cost of the under construction flat, including GST, stamp duty, registration, etc is  Rs 2.90 crore.

The under construction house is the only residential property owned by me. I have already claimed exemption of the said LTCG in my return for FY 2024–25 under section 54.  In the current financial year, the agreement for the flat has been registered and stamp duty was paid in July 2025. I have made substantial payments towards the purchase of the flat during this year.

To fund these payments, I have redeemed investments from schemes of mutual funds including debt funds (invested prior to 1 April 2023) and have also sold listed shares which has resulted in long-term capital gains. I would like to understand whether I can claim exemption for the long-term capital gains arising in the current financial year against the same under construction residential property and if so, the correct procedure for doing so?

Expert's Advice: Income tax laws allow an individual an HUF exemption from long term capital gains if investment is made in a residential house property whether ready to move in or construction of a house under two separate sections within prescribed time period. Booking an under construction house property is treated as self-construction for this purpose.

The first exemption is available under section 54 where the tax payer is required to utilise the unindexed long term capital gains from sale of a residential house for acquiring another residential house as the benefit of indexation is no longer available now.

The second exemption is available under section 54F in respect of investment in a residential house by investing the net sale consideration received from sale of any capital asset excluding a residential house resulting into long term capital gains. So in respect of long term capital gains transfer of listed shares, units of equity schemes and debts schemes acquired before 1st April 2023, you can avail exemption under section 54F.  This exemption is available only if the tax payer does not own more than one residential house on the date of sale of the asset giving rise to long term capital gains.

One of the condition prescribed under both the sections in respect of investment in an under construction property or self-construction is that the construction of the house should get completed within three years from the date of sale of the asset.

Claiming exemption under one section does not bar exemption under another section for the same property. Likewise claiming exemption in respect of long term capital gains arising in different years for the same residential house property is not barred under both the sections. So as long as the construction gets completed and the requisite amount is invested the taxpayer can claim exemption under both the sections and in respect of long term capital gains arising during multiple years.

Since you do not have more than one house and presuming that the construction will get completed within three years from the date of sale of the original residential house, you can claim exemption under section 54F for long term capital gains arising on sale of your stated investments on the same property on which you have already claim exemption under section 54 in the earlier year.

There is no special procedure required to be followed for claiming this exemption. You have to claim this exemption while filing your ITR for the respective years.

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