What is 54F for NRI?

Section 54F exemption claims can apply to the long-term capital gains. If you sell a residential house, then to claim the exemption, you should purchase a new residential house or construct a new house. Section 54F applied to the sale of any capital asset apart from residential property. The amount you have invested is equal to the sales proceeds, which can be claimed. Under section 54F, you can claim a maximum exemption of up to INR 10 crore. 

Here are some points that will help you to know about who can claim exemption under section 54F. 

• Individual and Hindu undivided families can claim exemption under section 54F on the capital gains from the transfer of long-term capital assets apart from a residential house. 
• If the taxpayers don't have more than 1 house, then he or she is eligible to claim an exemption under section 54F. The condition is that the taxpayer has purchased the property in just one year before or two years after the sale of a capital asset by the taxpayer. 

If you failed to construct a house within 3 years, then your exemption will be withdrawn.  

If the house is not sold within 3 years of purchase, then your exemption will be revoked. 

• If the taxpayer is purchasing another property within the construction of another house in 3 years or one year from the sale of assets, then the exemption can be claimed. If the taxpayer fails to use the sale proceeds for property buying or constructing the house before the date of filing an ITR, then the proceeds must be deposited in the capital gains account. 

To calculate the exemption under section 54F, you can use the given formula:  

54F Exemption = Capital Gains x The amount invested in residential property / Net Sale Consideration

If the amount you have invested in the residential property is more than INR 10 crore, then the maximum amount for the exemption should be restricted to INR 10 crore. 

Eligibility criteria for the sale under 54F: 

1. Reinvesting the Sale: The Section 54F clears the limit, which is subject to the amount of the sale, which is reinvested for the construction and purchase of new property. If a small part of the sale proceeds is reinvested, then the exemption under section 54F is allowed evenly. From 1 April 2024, the maximum deductions under section 54F are INR 10 crore. 

2. The Investment Period: The property should be purchased before 1 year or 2 years after the construction or sale of the asset, within 3 years of the sale of the old asset.   

The taxpayer does not possess a property on the date of sale apart from the one purchased to claim the exemption. 

The taxpayer should not construct a house in 4 years, and should not have purchased other property in 2 years from the date of transfer. 

3. The Lock-in-Period: In this period, the property should not be sold under 3 years of construction or purchase.