capital gain deduction u/s 54

For claiming deduction u/s 54F, you must invest whole sale proceeds in residential house property till the date of filling of return for concerned FY, if not invested in residential house property till the date of filling of return, you must open a LTCG account in any nationalised bank with the  sale proceeds, in this case you may invest the amount within three years.

1. According to sec 54 exemption will be available if the consideration from the sale of residential property is used to purchase another residential property within a period of 1 year before or 2 years after or in case of construction of residential property within a period of 3 years from the date of sale. 
2. In case of construction of a residential property, the same shall be deposited in Capital Gains Accounts Scheme (CGAS) within the due date of filing the return of income. 
3. The question concerning is whether the purchase of land will be considered as qualified exemption u/s 54..? 
Refer case law CIT v. Sardarmal Kothari (2008) 302 ITR 286
According to the above case, the department had not contended the investments made in the land while giving a verdict in the above case. 
4. Another important point for consideration is if the residential property is purchased that also includes land as a part of the value of the property and looking from that angle investment made in the land will also qualify for exemption u/s 54. But the land should only be used for the construction of a residential property and it cannot be kept idle as a mere investment. 
5. Hence in your case LTCG of Rs. 3,37,480 can be deposited in CGAS within due date for filing the ROI and investments made in the land will qualify for deductions u/s 54. 
Please correct me if the above interpretation has an alternative view. 

Originally posted by : Suresh Thiyagarajan
	1. According to sec 54 exemption will be available if the consideration from the sale of residential property is used to purchase another residential property within a period of 1 year before or 2 years after or in case of construction of residential property within a period of 3 years from the date of sale.  2. In case of construction of a residential property, the same shall be deposited in Capital Gains Accounts Scheme (CGAS) within the due date of filing the return of income.  3. The question concerning is whether the purchase of land will be considered as qualified exemption u/s 54..?  Refer case law CIT v. Sardarmal Kothari (2008) 302 ITR 286 According to the above case, the department had not contended the investments made in the land while giving a verdict in the above case.  4. Another important point for consideration is if the residential property is purchased that also includes land as a part of the value of the property and looking from that angle investment made in the land will also qualify for exemption u/s 54. But the land should only be used for the construction of a residential property and it cannot be kept idle as a mere investment.  5. Hence in your case LTCG of Rs. 3,37,480 can be deposited in CGAS within due date for filing the ROI and investments made in the land will qualify for deductions u/s 54.  Please correct me if the above interpretation has an alternative view.

Sale proceeds (not LTCG) of long term capital asset will be invested in residential house or deposited in LTCG account if not invested withing prescribed time i.e. untill the date of filling  of return, for the purpose of claiming deduction u/s 54F.

Yes, it should have been sale proceeds which need to be deposited in CGAS and not the LTCG. I  mistakenly used the word LTCG. I accept with Mr.Kamal