This one tax rule could turn Groww IPO gains into a Bengaluru East buying frenzy

Groww’s upcoming IPO could do more than mint new millionaires, it might quietly trigger a real estate boom in East Bengaluru. Mutual fund advisor Anand K Rathi believes the little-known Section 54F of the Income Tax Act could turn startup liquidity into property demand, funneling crores into residential markets.

In a detailed LinkedIn post, Rathi outlined how a “tax-saving” clause could push newly wealthy Groww employees to park their IPO earnings in real estate. Section 54F allows individuals to claim exemptions on long-term capital gains if the proceeds are reinvested into a residential property in India.

“One of my clients, a key employee at Groww, asked if there’s a way to save tax after selling shares post-IPO,” Rathi wrote. His chartered accountant’s advice: Buy property to save on long-term capital gains tax.

Key rules under Section 54F include:

• The exemption is capped at ₹10 crore.
• The taxpayer must not own more than one residential property at the time of sale.
• The exemption applies proportionally to the sale amount reinvested.
• It is also available to non-residents, provided the property purchased is in India.

Crucially, Rathi estimates that Groww’s IPO could unlock ₹2,500 crore in employee wealth. Even if just 20% of those eligible use this route to save tax, that could channel over ₹500 crore into property near the company’s Bengaluru office.

Real estate agents may see activity surge as early as this month. Why? The clause allows property purchases up to a year before the share sale to qualify for exemption—meaning buyers may already be shopping.

But Rathi cautions that only long-term capital gains qualify. Employees need to hold shares for at least 12 months post-listing. And with stock prices likely to fluctuate, planning should be conservative. “Just because your tax will be adjusted, don’t go overboard with your budgets,” he warns.

However, not all are convinced. Critics point out that most ESOP gains are treated as salary income—not capital gains—and thus may not qualify under Section 54F. Others argue that only founders holding equity directly will benefit.

Still, past patterns offer clues. Chintan Chheda, a wealth advisor, noted that Flipkart’s IPO-driven liquidity pushed prices up by 20–25% in parts of Bengaluru between 2018 and 2020. With IPOs from PhonePe and Meesho also expected soon, momentum may build.