You sold stocks or gold or property?: A CA explains how to pay zero tax under this housing rule
To qualify, the asset sold must not be a residential house—meaning gains from equity shares, mutual funds (excluding debt-oriented ones), gold, or commercial property are all eligible.
- Sep 12, 2025,
- Updated Sep 12, 2025 3:02 PM IST
Tax-savvy investors selling long-term assets like stocks, gold, or commercial property can slash their capital gains tax to zero, if they follow Section 54F of India’s Income Tax Act.
Chartered Accountant Kanan Bahl warns that many investors unknowingly pay a steep 12.5% capital gains tax, even when they qualify for a full exemption under Section 54F.
The provision allows individuals and Hindu Undivided Families (HUFs) to avoid tax on long-term capital gains if they reinvest in a residential property.
To qualify, the asset sold must not be a residential house—meaning gains from equity shares, mutual funds (excluding debt-oriented ones), gold, or commercial property are all eligible.
But the exemption only applies if the taxpayer uses the proceeds to purchase or construct a single residential house in India within a specific timeframe.
“People invest in shares or mutual funds to buy a house,” Bahl wrote on LinkedIn. “However, they end up paying 12.5% tax even when they can pay ZERO tax.”
The timelines are clear: the house must be purchased within one year before or two years after the asset sale—or constructed within three years. You also must not own more than one residential property at the time of sale.
Violations such as buying another house within two years or selling the new property within three years revoke the exemption, making the entire previously exempted capital gain taxable in the year of breach.
If the cost of the new house is equal to or greater than the net sale consideration, the entire long-term capital gain (LTCG) is exempt. If it's lower, a proportionate exemption is granted, calculated as: Exempt LTCG = LTCG × (Investment in new house ÷ Net sale consideration).
There’s a critical cap: even if you invest more, only ₹10 crore will be considered for calculating the exemption.
For example, if an investor sells an asset for ₹12 crore with a capital gain of ₹7.5 crore, and reinvests ₹10 crore into a new house, only ₹6.25 crore of the LTCG is exempt. The remaining ₹1.25 crore becomes taxable.
Another example: if the reinvestment matches the sale amount—say ₹10 crore sold, ₹10 crore reinvested—the entire gain is exempt, and no tax is owed.
In short, Section 54F offers a powerful tool to eliminate capital gains tax—but only if the reinvestment is timed and structured correctly.
Tax-savvy investors selling long-term assets like stocks, gold, or commercial property can slash their capital gains tax to zero, if they follow Section 54F of India’s Income Tax Act.
Chartered Accountant Kanan Bahl warns that many investors unknowingly pay a steep 12.5% capital gains tax, even when they qualify for a full exemption under Section 54F.
The provision allows individuals and Hindu Undivided Families (HUFs) to avoid tax on long-term capital gains if they reinvest in a residential property.
To qualify, the asset sold must not be a residential house—meaning gains from equity shares, mutual funds (excluding debt-oriented ones), gold, or commercial property are all eligible.
But the exemption only applies if the taxpayer uses the proceeds to purchase or construct a single residential house in India within a specific timeframe.
“People invest in shares or mutual funds to buy a house,” Bahl wrote on LinkedIn. “However, they end up paying 12.5% tax even when they can pay ZERO tax.”
The timelines are clear: the house must be purchased within one year before or two years after the asset sale—or constructed within three years. You also must not own more than one residential property at the time of sale.
Violations such as buying another house within two years or selling the new property within three years revoke the exemption, making the entire previously exempted capital gain taxable in the year of breach.
If the cost of the new house is equal to or greater than the net sale consideration, the entire long-term capital gain (LTCG) is exempt. If it's lower, a proportionate exemption is granted, calculated as: Exempt LTCG = LTCG × (Investment in new house ÷ Net sale consideration).
There’s a critical cap: even if you invest more, only ₹10 crore will be considered for calculating the exemption.
For example, if an investor sells an asset for ₹12 crore with a capital gain of ₹7.5 crore, and reinvests ₹10 crore into a new house, only ₹6.25 crore of the LTCG is exempt. The remaining ₹1.25 crore becomes taxable.
Another example: if the reinvestment matches the sale amount—say ₹10 crore sold, ₹10 crore reinvested—the entire gain is exempt, and no tax is owed.
In short, Section 54F offers a powerful tool to eliminate capital gains tax—but only if the reinvestment is timed and structured correctly.