Longterm Capital gain exemption on sale of residential land (54F appicability)

• The Form 60 entry of ₹25,000 will remain in AIS, and that is normal.

• No tax issue, no scrutiny risk, and nothing to worry about.

• Mark the entry as “Correct” in AIS feedback while filing ITR.

• No further action needed unless the bank voluntarily revises its report.

Land sold within urban municipal limits.

Land is in panchayat layout. Does this have any implication?

Applicable Law / Provisions

• Section 54F, Income-tax Act, 1961 – Exemption on LTCG arising from transfer of a long-term capital asset (other than a residential house) if net consideration is invested in a residential house in India.

• Section 54F(4) – Capital Gains Account Scheme (CGAS) deposit if investment is not completed before due date u/s 139(1).

• Section 2(29A) & 2(42A) – Long-term capital asset definition.

• CBDT Circular No. 667 dated 18-10-1993 – Clarifies timelines for purchase/construction.

Short Practical Answer

Yes, your case can qualify for exemption under Section 54F, provided all statutory conditions are satisfied—particularly (i) investment of net consideration (not merely capital gain) in one residential house in India within prescribed timelines, (ii) ownership conditions on the date of transfer, and (iii) proper utilisation/CGAS compliance if registration occurs after the sale.

Detailed Conditions, Timelines & Computation Logic

1) Nature of Asset Sold ✔️

• You are selling a plot of land (not a residential house).

• Held for 11 years ⇒ Long-Term Capital Asset.
  → Eligible asset for Section 54F.

2) Investment Asset ✔️

• One residential house in India (flat qualifies).

• Booking + registration is acceptable; registration within the allowed period is key.

3) Timelines (Critical) ⏱️

You must purchase the residential house:

• Within 1 year before the date of transfer of the plot, or

• Within 2 years after the date of transfer; or

• Construct within 3 years after transfer.

If your flat’s registration is scheduled within 3 months after the plot sale, you are well within the 2-year purchase window.

4) Amount to be Invested (Very Important) 💰

• To claim full exemption, you must invest the entire “Net Consideration”:
  Net Consideration = Sale Price – Transfer Expenses

• If only part of the net consideration is invested, exemption is proportionate:

$Exempt\; LTCG=LTCG\times Net\; ConsiderationAmount\; Invested$

(Indexation is used only to compute LTCG, not for the investment requirement.)

5) Ownership Conditions on Date of Transfer ⚠️

On the date you sell the plot, you must:

• Not own more than one residential house, other than the new flat being purchased.

Also, after claiming 54F:

• You must not purchase another residential house within 2 years, or

• Construct another residential house within 3 years from the date of transfer.
  Violation → exemption withdrawn.

6) Capital Gains Account Scheme (CGAS) 🏦

• If the sale happens before registration and any part of net consideration remains unutilised up to the due date of filing ITR u/s 139(1):

  • Deposit the unutilised amount in CGAS (Type A or B) before that due date.

• Amounts later used for the flat can be withdrawn from CGAS.

7) Documentation Checklist 📂

Keep the following safely:

• Sale deed of plot + proof of transfer expenses

• Purchase agreement, allotment letter, and registered sale deed of flat

• Payment proofs (bank statements, receipts)

• CGAS passbook/receipt (if applicable)

• Computation of LTCG with indexation

• Declaration of residential house ownership on date of transfer

8) Return Filing & Reporting 🧾

• Claim exemption in ITR-2 or ITR-3 (as applicable).

• Report:

  • Sale consideration

  • Indexed cost

  • Net consideration invested

  • Section 54F exemption amount

• Filing should be within the due date u/s 139(1) to avoid CGAS complications.

Caveats & When Human Review Is Needed

• If the flat is jointly owned, contribution and ownership proportions must be reviewed.

• If you own another residential house (including inherited/partially owned), eligibility needs careful examination.

• Delays in registration beyond timelines or incorrect CGAS handling can invalidate exemption.

Action Plan

1. Fix the exact date of plot sale and confirm flat registration date.

2. Compute Net Consideration vs. Amount Invested to ensure full exemption.

3. If needed, open CGAS before due date u/s 139(1).

4. Maintain a clear document trail for both transactions.