Difference between Section 54 and 54f of Income Tax Act?

Every property owner should know what type of tax is applicable on their property. When it comes to property tax exemption people get confused and fail to figure out the

difference between section 54 and 54f. Under Income Tax Act,  section 54 &54f were introduced by the Government of India to increase the flow of the real estate market.

Section 54 states that exemption is available on long term capital gain on the sale of a residential property. Whenever a person sells his/her property the money received from the sale after the reduction of expenses involved during the sale process is known as long term capital gain. Under section 54 if a person purchases a residential property from long term capital gain, in that case a person can claim for tax exemption.

• If the capital gain is less than 2 cr, then a person can purchase two or one  residential properties from that money. But you can not purchase the property of more than 2 cr.

• If the capital gain is more than 2cr then that person can purchase only one house or property to construct the house.

• From the date of sale of the house till 2 year a person can purchase a property.

• If a person wants to build a house from the capital gain he/she can construct the house within 3 years from the date of sale.

• A person can also avail capital gain scheme accounts. There he/she can save the capital gain amount and can withdraw at any point before filing the income tax return. But only for the purpose of house investment, either in purchase of a property or in construction of a property.

• A person can not sell his residential property before 3 year. If a person sells his property before 3 years then in that case the amount which was exempted earlier will be considered as the taxable amount. 

According to section 54f the long term capital gain from an asset other than a residential property can be exempted if you invest the gains in a residential property.

For Example: Capital gain received from your sugar mill business, if you purchase a house from the capital gain then you can claim for tax exemption on that amount under section 54f. 

• Section

  is applicable only for an individual and HUF.

• Section 54F is available on any long term capital gain except capital gain from residential houses.

• In order to claim exemption under this section assesses can invest money only on one residential house within time limit as mentioned below:

• The duration of purchase is similar to section 54. From date of sale to next 2 year or 1 year previous of sale.

• The person should not own more than one residential house from the date of sale of a property 

• Amount of exemption is restricted to:

  Cost of New Residential House is greater than NET consideration( sales - transfer exp) then full capital gain is exempt.

• The slight difference between section 54 and 54f is  under section  54 capital gain is considered only from the sale of residential property.

• Under 54f capital gain from any asset except from the residential house.

This is all about the difference between section 54 and 54f of income tax act by reading this answer.

There is a good likelihood that someone who owns a piece of property is making money from the sale. They must pay the Long Term Capital Gains Tax (LTCG) if that is the case. However, under Sections 54 and 54F of the Income Tax Act, the property seller may be eligible for a tax exemption if they plan to use the proceeds from the sale of their asset to buy or build a residential dwelling. I can assist you with the difference between section 54 and 54F of income tax act. 

What is difference between 54 and 54F?

The section 54 and 54f difference is given in the below-mentioned table;

I hope this satisfies your query about the difference between section 54 and 54F of income tax act. I hope this helps:)

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