Advance tax, Long Term Capital Gains & Sec 54F Exemption

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Jay Gandhi

Employee

24 Points Posted on 14 February 2024

Hello Tax experts,

My query is related to the interplay of Advance Tax, Long Term Capital Gains and Section 54F exemption for some recent financial transactions.

I sold shares in Jan 2024 and earned Long Term Capital Gains > Rs. 1 lakh. I plan to invest the entire sale proceeds in a residential property to avail LTCG tax exemption under Sec 54F.

1. So, do i need to pay advance tax on the LTCG ( @ 10% of LTCG) in March 2024 quarter to avoid interest/penalty under Sec 234A/B/C?

2. If I have to pay advance tax by Mar 2024, it means that i have effectively paid the LTCG tax to IT dept, and in future I'll have to seek refund of it when I apply for Sec 54F exemption. Is this understanding correct? If not, please correct me.

3. If i skip paying advance tax by Mar 2024 and deposit entire sale proceeds into Capital Gains Account Scheme (CGAS) by 31 July 2024, will i still be charged interest/penalty under Sec 234A/B/C?

4. Any other ways by which I can eliminate the need to pay taxes upfront/block my money whether in form of Advance tax, CGAS deposits, Sec 54F exemption etc.

Requesting genuine advice from the experts on this forum and thanking them in advance for their valuable time and advice.

Replies (5)

sabyasachi mukherjee

Profession Business

28238 Points Posted on 14 February 2024

Advance tax znd long term capital gain tax.

Chahat Garg

4 Points Posted on 17 February 2024

Hi Jay!, According to the income tax act If your total tax liability is Rs 10,000 or more in a financial year you have to pay advance tax.

In my opinion since you will be claiming exemption under section 54, no tax liability will arise and hence you will not be required to pay any advance tax and subsequently no interest liability will arise u/s 234ABC.

Jay Gandhi

Employee

24 Points Posted on 17 February 2024

Originally posted by : Chahat Garg
	Hi Jay!, According to the income tax act If your total tax liability is Rs 10,000 or more in a financial year you have to pay advance tax.In my opinion since you will be claiming exemption under section 54, no tax liability will arise and hence you will not be required to pay any advance tax and subsequently no interest liability will arise u/s 234ABC.

Hi Chahat,

What if my property purchase/agreement happens after 31st July 2024 i.e. I use Section 54F exemption after 31st July 2024 within the 2 year window of LTCG earned for ready-to-move property?

So, the timeline is like below-

1. Jan 01 2024 - Sold shares, LTCG > Rs. 1 lakh

2. By July 31 2024 - Property not finalized so deposited full sale proceeds into CGAS scheme

3. After July 31 2024 and before Jan 01 2026 - Property purchased under Sec 54F. Sec 54F exemption claimed in corresponding FY

In the above scenario, do I need to pay Advance tax for FY23-24 by Mar 15 2024?

Chahat Garg

4 Points Posted on 21 February 2024

Hii Jay, even though you are gonna make an agreement later on, you are going to claim exemption while filing the return for the A.Y. 2024-25 only, hence your tax liability is not going to arise and hence not liable to pay advance tax for that proportion.

Tax Garden

Tax Consultant

1002 Points Posted on 09 June 2026

Pay advance tax on the full LTCG until the actual 54F investment is made.

Section 54F exemption is available only AFTER you reinvest the sale proceeds in a new residential property. At the time of computing advance tax, if the new house is not yet purchased or constructed, the exemption cannot be assumed.

Safe approach:
- Pay advance tax on the entire LTCG amount at installment dates (15 June, 15 Sept, 15 Dec, 15 March).
- Once you invest within the time limit (2 years for purchase, 3 years for construction), claim 54F in your ITR.
- Overpaid advance tax gets refunded with interest u/s 244A.

One protection: deposit the net sale consideration in a Capital Gains Account Scheme (CGAS) before the ITR due date. This preserves the 54F exemption even if the house is not yet purchased.

This [Section 54, 54F and 54EC exemption guide](https://taxgarden.in/blog/capital-gains-exemption-section-54-54f-54ec) covers full conditions and time limits for each exemption.