Investigating Multi-Year Section 54F Tax Exemption Eligibility for Property Owners

Personal Finance Report: Section 54F Exemption for Under-Construction Properties

Overview

A taxpayer invested Rs 5 crore in an under-construction apartment on August 1, 2024, with a payment schedule of Rs 3 crore at the time of booking, Rs 1 crore in the current fiscal year, and Rs 1 crore in the next fiscal year. The taxpayer sold Rs 3 crore worth of shares in July 2024 and claimed exemption under Section 54F in the 2024-2025 ITR.

Question

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Can the taxpayer claim deduction under Section 54F in three different financial years for the same property?

Expert's Analysis

Section 54F allows an individual and a Hindu Undivided Family (HUF) to claim exemption in long-term capital gains (LTCGs) arising from the transfer of any capital asset other than a residential house property for which section 54 applies, if the net sale consideration received on sale of such a capital asset is invested for acquiring a residential house property in India within the prescribed time period.

In the case of an under-construction property, the construction is required to be completed within three years from the date of sale of the capital asset. The exemption is available only if the taxpayer does not own more than one residential house on the date of sale of the capital asset, except for the property for which Section 54F exemption is being claimed.

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Conclusion

Since the taxpayer will complete the construction within three years from the date of the first sale of shares in FY25 and owns only one residential house on the date of sale of each tranche of shares, the taxpayer will be able to claim exemption under Section 54F for all three years.