What is Section 54F Under Capital Gains?

Hi, Friend,

Do you want to know, what is section 54F of Income Tax Act? Let me assist you with this. You may purchase capital assets to provide a source of funds for your financial goals, as well as to prepare your estate and legacy. When you sell these capital assets, the amount you make is referred to as a capital gain. 

Although such a gain is taxable, the Income Tax Act of 1961 allows for tax savings on such gains. These advantages can help you reduce your capital gains tax liability and enhance your disposable income.

Section 54F of capital gain deals with the capital gains received from the sale of capital assets and is considered one such tax-saving section.

Section 54F of the Income Tax Act of 1961 exempts long-term capital gains from taxation where they are received through the sale of a capital asset other than a residential home. So, if you sell capital items like stocks, bonds, jewellery, gold, or other valuables and reinvest the proceeds in the purchase or construction of a home, the profits from the sale are tax-free under Section 54F

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You must meet some fundamental requirements to seek a legitimate exemption under Section 54F of the Income Tax Act. 

• Individuals and Hindu Undivided Families are eligible for the exemption (HUFs)

• To qualify for the exemption, the revenues from the sale must be used in the following way:

1. to purchase a new residential property one year before to the asset's sale date

2. to purchase residential property within two years of the asset's sale

3. Construct a residential property within three years of the asset's sale

• The whole exemption would be denied if you have invested a portion of the sale money in the property. In such circumstances, the exemption would be proportionately available. 

The exemption amount would be computed as follows: Net consideration * capital gains * amount invested

I hope this answer would provide you with the necessary insights about section 54f of income tax act.

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