Section 54F

Want to buy a house by redeeming mutual fund investments?

Are you planning to buy a residential flat by investing the redemption proceeds of mutual fund investment? Will you be able to claim capital gain exemption if you reinvest the redemption proceeds for buying the second residential flat or claim the benefits a second time ?

Well the answer is – 

Section 54F of Income Tax Act, allow an individual and an HUF to claim exemption from long term capital gains arising from sale of an asset other than a residential house if the net sale consideration received on sale of such asset is invested to buy a residential house property within specified time period subject to fulfilment of certain conditions. Long term capital gains arises in mutual funds if you hold your investments more than 3 years for debt investments & for 1 year for equity investments.

This exemption can only be claimed if the you do not own more than one house on the date of sale of the assets.

The sale consideration has to be invested to buy a residential house one year prior or within two years from sale of the mutual fund investments. You can also self-construct a residential house or book an under construction property and get the construction completed or possession within three years from the date of sale of your mutual fund investments. Amount remaining unutilised by  31st July, of the next financial year  i.e. the due date of filing of your ITR has to be deposited in capital gains account scheme on or before this date.

You can claim this exemption for second house even if you have already claimed similar exemption earlier.

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Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 14 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata.

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