20 July 2016
Exemption under Section 54F is available, when there is capital gains from sale of a long-term asset other than a house property. A new residential house property must be purchased to claim this exemption. The new property can be purchased either one year before the sale or 2 years after the sale of the property. The gains can also be invested in the construction of a property, but construction must be completed within 3 years from the date of sale. In Budget 2014-15, it has been clarified that only ONE house property can be purchased or constructed from the capital gains to claim this exemption. Its important to note that this exemption can be taken back if this new property is sold within 3 years of its purchase. The entire sale proceeds towards the new house will be exempt from taxes, if you meet the above said conditions. However, if you invest a portion of the sale proceeds, the exemption will be the proportion of the invested amount to the sale price or exemption = cost of new house x capital gains/net consideration.
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