Section 54 vs Section 54F

Both sections let an individual or HUF defer long-term capital-gains tax by reinvesting in a residential house in India. They look similar but answer different questions. The asset you sold decides which one applies — and that single fact changes how much is exempt.

Section 54 — when you sell a residential house

• WhoIndividual or HUF
• Asset soldA long-term residential house (held > 24 months)
• Reinvest inOne residential house — bought 1 year before or 2 years after the sale, or constructed within 3 years
• ExemptionLower of the capital gain or the amount reinvested
• Two-house optionOnce in a lifetime, the gain may be split across two houses if the capital gain does not exceed ₹2 crore

Because the relief is measured against the gain (not the whole sale price), you do not have to reinvest the entire consideration to shelter the gain.

Section 54F — when you sell any other long-term asset

• WhoIndividual or HUF
• Asset soldAny long-term capital asset other than a residential house — e.g. land, listed/unlisted shares, gold
• Reinvest inOne residential house — same time limits as Section 54
• ExemptionProportionate: Capital Gain × (Amount invested ÷ Net sale consideration)
• Ownership conditionYou must not own more than one residential house (besides the new one) on the date of transfer
• ClawbackBuying another house within 2 years / constructing within 3 years can withdraw the exemption

Here the relief is measured against the net consideration, so full exemption needs the entire net sale proceeds to be reinvested — invest only part, and only that proportion of the gain is exempt.

Side by side

• Asset sold54: residential house  |  54F: any other LT asset
• Reinvest measured on54: capital gain  |  54F: net consideration
• Partial reinvestment54: shelters gain up to amount invested  |  54F: proportionate only
• Other-house restriction54: none  |  54F: max one other house on sale date

The maths, with two illustrations

Timelines & the Capital Gains Account Scheme

If the reinvestment is not completed before the income-tax return due date under section 139(1), the unutilised amount should be parked in a Capital Gains Account Scheme (CGAS) account by that date to preserve the exemption, and then used within the purchase/construction window. Missing the CGAS deposit deadline is one of the most common reasons exemptions are lost.

The ₹10 crore cap (from AY 2024-25)

For both sections, the amount of investment in the new residential house that qualifies for exemption is capped at ₹10 crore (Finance Act 2023). Investment above that ceiling does not increase the exemption.

Where people slip up

• Wrong sectionTreating a land/share sale as if Section 54 applies
• Net vs gainUnder 54F, assuming reinvesting the gain (not the consideration) gives full relief
• CGAS deadlineMissing the 139(1) due date for parking unutilised funds
• 54F ownershipAlready owning more than one other house on the sale date
• Holding periodAssuming long-term status without checking the 24-month threshold for immovable property

This note is general information about how these provisions are structured under the Income-tax Act, 1961, and is current to AY 2024-25. It is not advice on any specific transaction; exemptions depend on exact facts, dates, amounts, and conditions, and the law may change. For your situation, please get in touch.