Income Tax Rules 2025: How to Save Long-Term Capital Gains Tax from Sale of Shares Under Section 54F
Selling shares can bring handsome profits, but it also triggers long-term capital gains (LTCG) tax. Luckily, Section 54F of the Income Tax Act allows investors to legally save tax if certain conditions are met. Here’s a detailed guide for 2025.
1. What Section 54F Offers
Section 54F provides tax exemption on LTCG from selling any asset except a residential house, provided the gains are invested in a new residential property.
Ready-to-move property: Buy within 2 years from the sale date.
Under-construction property: Must be completed or acquired within 3 years.
Already purchased property: If bought up to 1 year before the sale, exemption is allowed.
This flexibility lets investors plan property purchases in advance while saving taxes.
2. Rs 10 Crore Investment Cap
The tax exemption under Section 54F is capped at Rs 10 crore.
Example: If your capital gains are Rs 12 crore, only Rs 10 crore invested in a new property qualifies for exemption.
The remaining Rs 2 crore will be taxable.
This ensures that only investments up to a reasonable limit benefit from tax relief.
3. capital Gains Account Scheme (CGAS)
What if you cannot immediately invest the gains in property before the tax return deadline? The law provides a solution:
Deposit the unutilized capital gains in a Capital Gains Account Scheme (CGAS) with a bank.
Use this money later to buy or construct a property within the allowed period.
For Assessment Year 2025-26, the ITR filing deadline is september 15, 2025.
This keeps you eligible for exemption even if the property purchase is delayed.
4. Ownership Condition: Only One House
A key requirement: Section 54F is applicable only if you own at most one residential property at the time of claiming exemption.
If you own more than one house, you cannot claim the benefit.
For investors like Sujit Pandey (owning only one house), investing gains in a new residential property makes them eligible for tax exemption.
5. Step-by-Step Checklist to Claim Section 54F Exemption
Ensure the asset sold is not a residential house.
Plan your new property purchase within the allowed timeframe (1 year before or 2–3 years after sale).
Do not own more than one existing house.
Deposit unutilized gains in CGAS if immediate investment isn’t possible.
Maintain records of the property purchase and CGAS deposits for ITR filing.
6. Final Takeaways
Section 54F is a legal way to save LTCG tax from selling shares or other non-residential assets.
Investment timelines and ownership rules are crucial to claim the benefit.
Maximum exemption is capped at Rs 10 crore, so plan large investments carefully.
Use CGAS if the property purchase is delayed to stay compliant.
Always consult a tax advisor before making big investments to avoid mistakes.
Section 54F offers investors a smart route to minimize taxes while investing in real estate. With proper planning, compliance with deadlines, and careful documentation, you can save substantial tax legally on your long-term capital gains.
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