Section 54F of the Income Tax Act saves tax on a long-term capital gain when you sell something that is not a house, such as a plot, a shop or shares, and put the sale money into one residential house in India. If you invest the whole net sale amount, the whole gain is exempt. If you invest part of it, part of the gain is exempt.
This guide covers sales in the financial year 2025-26 (AY 2026-27), under the Income-tax Act, 1961. For sales from 1 April 2026, see section 54F in the new Income-tax Act below. For how the gain itself is taxed, see our guides on capital gains tax on property and capital gains tax on shares.
Section 54F at a glance
| Rule | Section 54F |
|---|---|
| Who can claim | Individuals and HUFs |
| What you sold | Any long-term capital asset that is not a residential house |
| What you must buy | One residential house in India |
| Time to buy | 1 year before the sale, or up to 2 years after it |
| Time to build | Up to 3 years after the sale |
| How much is exempt | Whole gain if you invest the whole net sale amount; otherwise a share of it |
| Limit | The cost of the new house is counted up to ₹10 crore |
| Other houses you own | Not more than one, on the date of sale |
| Lock-in | Do not sell the new house for 3 years |
| Not bought by the return due date | Deposit the money in the capital gains account scheme |
Each row is explained below.
Who can claim section 54F
You can claim section 54F if:
- you are an individual or an HUF (a company or firm cannot), and
- you sold a long-term capital asset that is not a residential house.
So the asset you sold can be a plot of land, a shop or office, or shares, as long as it was long-term. Land and buildings are long-term if held for more than 24 months; listed shares if held for more than 12 months.
If what you sold was a residential house, section 54F does not apply. Section 54 covers that case (see the difference below).
Time limits to buy or build the house
The new house must be one residential house in India. Count the time from the date you sold the original asset:
| Option | Time limit |
|---|---|
| Buy a house | 1 year before the sale, or within 2 years after it |
| Build a house | Within 3 years after the sale |
A house you bought within the 1 year before the sale counts, even though you paid for it before you got the sale money.
How much gain is exempt under section 54F
Section 54F looks at your net consideration, not just your gain. Net consideration is the full sale value minus the expenses of the sale itself, such as brokerage.
- If the new house costs as much as or more than the net consideration, the whole gain is exempt.
- If it costs less, only part of the gain is exempt:
Exempt gain = capital gain × cost of the new house / net consideration
The cost of the new house is counted only up to ₹10 crore. Anything above ₹10 crore is ignored.
Example 1: whole gain exempt. You sold a plot for ₹80,00,000 and paid ₹80,000 brokerage. The plot cost you ₹49,20,000. You bought a flat for ₹80,00,000 within 2 years.
| Amount | |
|---|---|
| Sale value | ₹80,00,000 |
| Less: brokerage | ₹80,000 |
| Net consideration | ₹79,20,000 |
| Less: cost of the plot | ₹49,20,000 |
| Long-term capital gain | ₹30,00,000 |
| Cost of the new flat | ₹80,00,000 (more than ₹79,20,000) |
| Exempt under section 54F | ₹30,00,000 |
Example 2: part of the gain exempt. Same sale, but the flat costs ₹60,00,000.
| Amount | |
|---|---|
| Exempt gain | ₹30,00,000 × ₹60,00,000 / ₹79,20,000 = ₹22,72,727 |
| Taxable long-term capital gain | ₹7,27,273 |
Example 3: the ₹10 crore limit. Your net consideration is ₹15 crore and your gain is ₹6 crore. You buy a house for ₹12 crore. Only ₹10 crore of its cost is counted.
| Amount | |
|---|---|
| Exempt gain | ₹6 crore × ₹10 crore / ₹15 crore = ₹4 crore |
| Taxable long-term capital gain | ₹2 crore |
The taxable part is taxed like any other long-term gain on that asset. The property guide and the shares guide give the rates.
The rule on other houses you own
Section 54F has a condition that section 54 does not have:
- On the date of sale, you must not own more than one residential house, not counting the new one. Owning one other house is fine. Owning two or more means no section 54F exemption.
- After the sale, if you buy another house (other than the new one) within 2 years, or build one within 3 years, the exemption is taken back in that year.
This rule is about houses whose income is taxed under "Income from house property". If one of your houses is used in your business, ask a CA how the rule applies to you.
When the section 54F exemption is taken back
The exempt gain becomes taxable as a long-term capital gain in these cases:
| What happens | When it is taxed |
|---|---|
| You sell the new house within 3 years of buying or building it | In the year you sell the new house |
| You buy another house within 2 years, or build one within 3 years, after the sale (other than the new house) | In the year you buy or build that house |
| Money kept in the capital gains account scheme is not used in time | In the year in which 3 years from the sale end (see below) |
Capital gains account scheme: if you have not bought the house yet
You may not find the right house before your return is due. The law lets you keep the exemption by parking the money first:
- Work out the part of the net consideration you have not used for the new house yet.
- Deposit it in an account under the Capital Gains Accounts Scheme, 1988, at a bank allowed under the scheme, no later than the due date for filing your return under section 139(1).
- File your return with proof of the deposit. The money you used plus the deposit counts as the cost of the new house.
- Use the deposit to buy the house within 2 years, or build it within 3 years, of the sale.
If you do not use all of it in time, the part of the exemption linked to the unused money becomes taxable in the year in which 3 years from the sale end. You can then withdraw the unused money under the scheme.
Example 4. Take the sale in Example 1 (net consideration ₹79,20,000, gain ₹30,00,000). You deposit ₹79,20,000 in the scheme before the due date and claim the whole ₹30,00,000 as exempt. Within 3 years you build a house using ₹60,00,000.
| Amount | |
|---|---|
| Exemption claimed | ₹30,00,000 |
| Exemption the ₹60,00,000 actually used would give (Example 2) | ₹22,72,727 |
| Taxed in the year 3 years from the sale end | ₹7,27,273 |
| Unused money you can withdraw | ₹19,20,000 |
Filing late does not move this deadline. If you miss the due date, see our guide to belated returns and the late fee.
Difference between section 54 and 54F
| Section 54 | Section 54F | |
|---|---|---|
| What you sold | A long-term residential house | Any long-term asset that is not a residential house |
| What you must invest | The capital gain | The net sale amount (net consideration) |
| How much is exempt | The lower of the gain and the amount invested | Gain × cost of new house / net consideration |
| Limit | Exemption up to ₹10 crore | Cost of the new house counted up to ₹10 crore |
| Number of new houses | One; two, once in a lifetime, if the gain is up to ₹2 crore | One |
| Rule on other houses you own | None | Not more than one other house on the date of sale |
| Time to buy or build | 1 year before or 2 years after; build within 3 years | Same |
| Lock-in on the new house | 3 years | 3 years |
| Capital gains account scheme | Yes | Yes |
Using the same numbers shows the gap. With a ₹30,00,000 gain and ₹60,00,000 invested in a new house, section 54 exempts the whole ₹30,00,000, because you invested more than the gain. Under section 54F, as in Example 2, only ₹22,72,727 is exempt, because you invested less than the net consideration.
If you sold land or a building, section 54EC bonds are another way to save tax on the gain. The property guide explains it.
How to claim section 54F in your ITR
You claim section 54F in your income tax return:
- File ITR-2, or ITR-3 if you also have business or professional income. ITR-1 and ITR-4 cannot be used for these gains. See which ITR form to file.
- In Schedule CG, fill item D, "Information about deduction claimed against Capital Gains", in the section 54F row.
- The row asks for: the date you sold the original asset, the cost of the new house, the date you bought or built it, any amount deposited in the capital gains account scheme before the due date (with the date of deposit, account number and IFS code), and the amount of deduction you claim.
Keep the sale deed, the purchase or construction papers for the new house, and the scheme deposit proof.
If you have already filed and left out the claim, a revised return can correct it within its time limit.
Section 54F in the new Income-tax Act
The Income-tax Act, 2025 applies to sales from 1 April 2026 (tax year 2026-27). In it, the same relief is in section 86, "Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house". It keeps the same main rules: individual or HUF, a long-term asset that is not a house, one house in India, the same time limits, the share-of-gain formula, the rule on owning more than one other house, the ₹10 crore limit, the 3-year lock-in, and the deposit scheme.
So for a sale made on or after 1 April 2026, the relief is claimed under section 86, not section 54F.
How FilingSetu can help
We file income tax returns with capital gains, and we help with section 54F.
- We check whether your sale and your new house meet the section 54F conditions, and work out the exempt part.
- We advise on the capital gains account scheme deposit and report it correctly in your return.
- A chartered accountant checks every return before filing, and we help you e-verify it.
- You get a named manager, and the consultation is free.
Frequently asked questions
What is section 54F of the Income Tax Act?
It exempts a long-term capital gain on the sale of any asset other than a residential house, if an individual or HUF invests the net sale amount in one residential house in India within the time limits.
What is the difference between section 54 and 54F?
Section 54 is for selling a house and needs only the gain to be reinvested. Section 54F is for selling any other long-term asset and needs the whole net sale amount to be reinvested for a full exemption. Section 54F also bars you if you own more than one other house on the date of sale.
How many times can section 54F be claimed?
Section 54F does not set a limit on the number of claims, unlike the two-house option under section 54, which is once in a lifetime. Each sale must meet all the conditions, including the rule on other houses you own.
What investments qualify for the 54F exemption?
Only one residential house in India, bought 1 year before or 2 years after the sale, or built within 3 years. Money deposited in the capital gains account scheme before the return due date counts until it is used for that house.
How to show 54F exemption in ITR?
In ITR-2 or ITR-3, fill Schedule CG item D, "Information about deduction claimed against Capital Gains". Enter the date of sale, the cost and date of the new house, any scheme deposit with its date, account number and IFS code, and the amount claimed.
What are the conditions for section 54F?
You must be an individual or HUF, sell a long-term asset that is not a house, buy or build one house in India within the time limits, own not more than one other house on the date of sale, and not sell the new house within 3 years.
Is there a limit on the section 54F exemption?
The cost of the new house is counted only up to ₹10 crore. The section sets no separate cap on the exempt amount itself.
Can I claim section 54F on sale of shares?
Yes, if the shares were a long-term capital asset. Shares are not a residential house, so the gain can be exempt if you invest the net sale amount in one house and meet the other conditions.
Can I claim 54F if I already own a house?
Yes, if you own only one other residential house on the date of sale. If you own two or more, apart from the new one, you cannot claim it.
What happens if I sell the new house within 3 years?
If you sell it within 3 years of buying or building it, the gain that was exempt under section 54F becomes taxable as a long-term capital gain in the year you sell the new house.
What if I cannot buy the house before filing my return?
Deposit the unused amount in the capital gains account scheme before the due date for filing your return, and attach proof. Then use it within 2 years to buy, or 3 years to build.
What is net consideration in section 54F?
It is the full sale value minus the expenses of the sale itself, such as brokerage. Section 54F compares the cost of the new house with this amount.
What is section 54F in the new Income Tax Act?
For sales from 1 April 2026, the same relief is in section 86 of the Income-tax Act, 2025, with the same main conditions.
Hinglish mein sawaal
Plot bechkar ghar khareedna ho to tax kaise bachega?
Section 54F se. Plot 24 mahine se zyada rakha ho, poora net sale amount ek ghar mein lagaya ho, aur baaki shartein poori hon, to poora gain tax-free hai. Kam lagaya to utne hi hisse ka gain tax-free hoga.
54F mein ghar kitne time mein lena hota hai?
Bechne se 1 saal pehle se lekar 2 saal baad tak khareed sakte hain, ya 3 saal mein bana sakte hain. Return ki due date tak paisa na lage to capital gains account scheme mein jama karna hota hai.
Last reviewed: 2 October 2026
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This page explains the law as it stands on the review date. It is not advice on your specific case.
