Section 54F differs from Section 54 in one important way: the asset sold need not be a house, so the exemption is not simply the lower of gains and reinvestment. Instead it is proportionate — Exempt LTCG = LTCG × (cost of new house / net consideration) — unless the cost of the new house equals or exceeds the net consideration, in which case the entire LTCG is exempt. The condition that the assessee not own more than one other residential house on the date of transfer is absolute; breaching it at any point in the specified period withdraws the exemption.
Finance Act 2023 inserted a proviso capping the cost of the new residential house considered for exemption under both Section 54 and Section 54F at ₹10 crore, effective from AY 2024-25 — high-value reinvestments beyond that figure no longer shelter the excess gain, regardless of how much is actually spent. The cap applies to the cost of the new asset used in the exemption computation, not to the LTCG or exemption amount directly, and remains in force for FY 2026-27 / AY 2027-28.
Section 54 exempts long-term capital gains on the sale of a residential house, to the extent the gain is reinvested in another residential house — purchased within 1 year before or 2 years after the transfer, or constructed within 3 years after. The exemption is the lower of the LTCG and the amount reinvested.
Section 54F applies when the asset sold is NOT a residential house (shares, land, gold, and so on), and the entire net sale consideration — not just the gain — is tested for reinvestment into a residential house. The exemption is proportionate: LTCG × (cost of new house / net consideration), capped at the full LTCG if the new house costs at least as much as the net consideration. The assessee must not own more than one other residential house, besides the new one, as on the date of transfer.
Section 54EC allows LTCG arising from the transfer of land or a building (or both) to be exempted by investing in notified bonds — issued by NHAI, REC and other specified institutions — within 6 months of the transfer, subject to a ₹50 lakh cap per financial year. If reinvestment under any of these sections is not completed before the due date for filing the return, the unutilised gain must be deposited into a Capital Gains Account Scheme (CGAS) account by that due date to preserve the exemption.
An individual sells listed shares for a net consideration of ₹2 Cr, realising LTCG of ₹80 L, and buys a residential house for ₹90 L within the statutory window. They own no other residential house.
