Exemption u/s. 54f

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Amrish (Querist)
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22 March 2012 I have sold urban agriculture land after converting it in NA, by dividing it into small residential plots. I have invested Some amount for purchasing residential plot for construction of new residential house for me. as per scheme of 54F, if i am not able to invest the full consideration in purchasing/construction of new house i have to deposit it in Capital Gain A/c. Scheme to avail exepmtion.
My que is if i do not wish to deposit money in Capital Gain A/c. Scheme, whether i can get exemption for the amount already invested in purchasing Residential land/plot?

Prakash Kochar

Prakash Kochar (Expert)
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24 March 2012 Exemption u/s. 54F is conditional. Exemtion is available if amount is invested for acquiring residential house by way of purchase or construction within stipulated time. Amount does not qualify if invested in purchasing residential land/plot.

Amrish

Amrish (Querist)
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26 March 2012 Thanks Mr. Prakash!!!
But in my Case Residential Plot is purchased with intent to construct residential house within a period of 3 years from the date of transfer of agriculture land (LTCA in question). So i am eligible for exemption u/s. 54F. But My question is whether Part amount invested within stipulated time is eligible or not? i do not want to claim full exemption, i just want to claim partial exemption to the extent amount already invested. Actually i will pay consideration for plot of land for construction of my house in installments. and i do not want to deposit the unutilized money in Capital Gain Deposit Scheme.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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21 July 2024 Under Section 54F of the Income Tax Act, 1961, an individual can claim exemption from long-term capital gains tax if the gains are invested in purchasing or constructing a new residential house. Here’s how it applies to your situation where you have sold urban agricultural land and intend to construct a residential house:

### Key Points to Consider:

1. **Investment in Residential Plot**:
- You have sold urban agricultural land after converting it into non-agricultural (NA) land by dividing it into residential plots.
- You have invested some amount in purchasing a residential plot with the intention to construct a new residential house within 3 years from the date of sale of the agricultural land.

2. **Partial Exemption under Section 54F**:
- Section 54F allows for exemption on long-term capital gains if the entire sale proceeds (or the net consideration after deducting expenses) are invested in purchasing or constructing a new residential house.
- If you do not invest the full amount in the new residential house, the remaining amount should be deposited in a Capital Gains Account Scheme (CGAS) before the due date of filing the income tax return to claim exemption.
- However, if you do not wish to deposit the unutilized amount in the CGAS and prefer to claim partial exemption for the amount already invested, you may face challenges because Section 54F typically requires full investment of the capital gains for maximum exemption.

3. **Eligibility for Partial Exemption**:
- As per the provisions of Section 54F, to claim any exemption, the entire net consideration from the sale of the urban agricultural land (after deducting expenses) should ideally be reinvested.
- If only a part of the proceeds are reinvested in the residential plot within the stipulated time, the exemption under Section 54F may not be available for the proportionate amount of capital gains that remain uninvested or not deposited in CGAS.

4. **Alternative Options**:
- If you have invested a partial amount in the residential plot and do not wish to deposit the remaining amount in CGAS, you might consider other provisions such as Section 54EC (investing in specified bonds) or Section 54B (for agricultural land) if applicable.
- Consultation with a tax advisor is recommended to explore the best strategy based on your specific circumstances and to ensure compliance with tax laws.

### Conclusion:

While Section 54F provides for exemption on long-term capital gains if invested in a new residential house, the requirement typically is for full reinvestment of the sale proceeds. If only a partial amount is reinvested, claiming partial exemption under Section 54F directly without depositing the unutilized amount in CGAS may not be feasible. It’s crucial to plan the investment and tax strategy carefully with professional advice to maximize tax benefits while complying with legal requirements.