Sale of Shares to purchase immovable property

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This discussion clarifies how capital gains from selling shares and mutual funds can be exempt when reinvested in residential property under Section 54F of the Income Tax Act. Key points include the requirement for long-term capital gains, specific ITR filing procedures, and timeframes for purchasing or constructing a new property. It also highlights the need to park unutilised funds in a Capital Gains Account if the investment isn't fully completed before filing the tax return.

Tripti Singh

Tripti Singh (Querist)
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26 August 2022 Hi All,

I had sold some mutual fund in April 21-(AY-2022-23) and unlisted shares( received as part of ESOP) and invested the proceeds in Purchase of residential flat. However the flat is still not ready for occupancy and OC has not been recevied.
Can anyone guide if the capital gain on sales of shares / mutual fund would be exempt if its invested in proeprty?
If yes what should be the criteria to claim the same?
And to what extent the amount would be exempted.
Please guide in a bit detail to arrive at some conclusion on exemption u/s 54.

Thanks,
TS

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 August 2022 1. Yes, provided Long Term Capital Gain arrived at by sale of Shares & MF units.
2. File ITR 2, Schedule CG along with Schedule 112A, & fill the details of LTCG & claim exemption u/s. 54F of IT act.
3. Total sales proceed to be invested in the purchase/construction of residential property.
N.B. ::Check the eligibility criteria for sec. 54F of IT act.

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Tripti Singh

Tripti Singh (Querist)
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26 August 2022 Is there any time frame between sale of asset and Purchase of immovable property to claim the same?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 August 2022 As specified under sec. 54F of the act, 2 years for purchase & 3 years for construction of the new house property; after the sale of original asset.
But you need to park the funds in Capital Gains Accounts Scheme, 1988; if the funds are not totally utilized in new house property, before filing ITR of previous year.

Anumanchipalli Sathikonda

Anumanchipalli Sathikonda (Expert)
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29 August 2022 Dear Tripti Singh and Dear Dhirajlal Rambhia
Regarding eligibility for exemption u/s 54F you may refer to CBDT Circular No.471 of 1986 and CBDT Circular No.672 of 1993. The builder falls under the ambit of other institution mentioned in the circular.

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