Utilising Section 54(F) for capital gains reinvestment in under construction Home

Hi, I am a first time home buyer and do not have any other houses. I am purchasing a house in me and my wife's name whose possession date is 2030. I am highly confused with the terminology"construction within 3 years". Since it is a construction linked plan can i redeem my LTCG mutual funds(Principal+Gains) and adjust it against the payment made to the builder via the receipt every year upto 2 years from date of payment. Even if the payment is made via loan and i redeem to fund my OD Home loan account will this exemption be granted? Looking forward for help in this 

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Quick Summary
This discussion explores how to utilise Section 54F for reinvesting capital gains from mutual funds into a new home purchase. The user is a first-time buyer with a property possession date of 2030, exceeding the typical 3-year construction limit. They seek clarity on whether redeeming mutual funds (principal and gains) to fund annual payments to the builder, even if financed by a loan and repaid via an overdraft facility, qualifies for the exemption. The advice suggests that while the delayed possession poses a risk, judicial precedents may protect buyers if funds are fully invested and the builder is responsible for delays. Unused funds must be placed in a Capital Gains Account Scheme (CGAS) account before the ITR filing deadline.

To claim the Section 54F exemption, you must reinvest the entire net consideration (principal + gains) from your mutual funds. Because the 2030 possession date exceeds the strict 3-year construction limit, there is a risk of IT scrutiny, though judicial precedents typically protect buyers if the funds are fully invested and the builder is at fault for the delay. You cannot keep the money in a regular savings account; unutilized funds prior to your ITR filing date must be parked in a CGAS account. Finally, buying the property in joint names with your wife and routing the mutual fund proceeds to pay off a dedicated home loan OD account are both legally permissible for claiming the exemption.

Thanks Aashok for your detailed reply. I have one additional query. The money is being kept in not a regular svaings account but deposited in the Home loan account which has an Overdraft facility (SBI Maxgain). For eg:  If i have to pay 40% of total property amount of which 30% is paid by loan and 10% by self. I liquidate 20% of the total amount required from Mutual funds and use the entire proceeds(Principal+Caputal gains) to fund 10%, paid to builder and the balance 10% to the Home loan account will that be considered for tax exemption under section 54F?

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