Section 54F Exemption on residential house acquired abroad

As per the Income Tax Act's Section 54F, exemption of capital gain is made available in the situation of long term capital assets transfer against the investment one makes in a residential house. Some of the features to avail exemptions u/s 54F are mentioned below:

  • • The exemptions u/s 54F is for Hindu Undivided Families and individuals.
  • • The capital gain that arises for transferring any long term capital assets that is other than the residential house.
  • • Net consideration that arises for transferring long term capital assets that are invested in the following:

  • • Circumstances in Which Exemptions U/S 54F is Not Available

    • • The taxpayer has more than one residential property on the date of transfer of actual asset. However, the house that is brought to claim the exemption u/s is exempted from this.
    • • The taxpayer constructs an additional residential property, other than the new asset, within three years from the transfer date of the original asset.
    • • The taxpayer buys an additional residential property, other than the new asset, within one year from the transfer date of the original asset.
  • • How much Deduction can be claimed?

  • • Consequences of Net Asset Transfer

    In the situation of transfer of newly purchased or constructed residential property before expiration of 3 years period from its purchase or construction, as per the case at that time, then the capital gain that is exempted u/s 54F will be taxable under long term capital gain of the last year wherein the new asset is being transferred.

  • • Account Scheme for Deposit of Capital Gain

    While talking about net consideration, if it is not re-invested within the last date of return filing of income u/s 139, and then the amount must be deposited in the scheme for the capital gain deposit account. The amount that is deposited in the account of the capital deposit scheme must be used to purchase or construct the residential property within the specific period. If the deposited amount in the capital gain scheme of deposit account is not utilized partially or completely within the specific period for construction or purchase, as the case can be, then in such situation on the period's expiry, the unutilized amount is treated as long term capital gain.

  • • What if the Long term capital gain is invested abroad?

    Provision in section 54F comes w.e.f. 01.04.2015, according to which it was clarified that the residential house is to be acquired only in India. The amendment to Section 54F by the Finance Act, 2014 are applicable w.e.f. 2015 and is applicable only prospectively.

Disclaimer:“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”

Prepared By

Prajwal B R

Date: 19/03/2020