Section 54F for NRIs: reinvest property sale gains to buy a new home
Section 54F allows NRIs to claim a full LTCG exemption on the sale of any long-term capital asset (land, shares, mutual funds, gold) — not just residential property — by investing the entire sale consideration (not just the gain) in one new residential property in India within the specified time limits.
Invest full sale consideration (not just gain) in new home for full exemption
Under Section 54F, an NRI who sells any long-term capital asset (land, equity, gold, mutual funds) can claim LTCG exemption by investing the entire sale consideration — not just the capital gain — into one new residential property in India. If only part of the consideration is reinvested, only a proportional exemption is available.
Key points
- Entire sale consideration, not just gain — Unlike Section 54 (property-to-property), Section 54F requires investing the full sale consideration (not just the LTCG) to claim full exemption.
- One new residential property — Only one residential property qualifies. The NRI must not own more than one other residential property on the date of sale.
- 3-year construction or 2-year purchase window — Purchase a new property within 2 years of sale (or 1 year before sale). Construct within 3 years of sale. Deposit in CGAS if the deadline falls before ITR filing.
How Section 54F works for NRIs
Eligible assets: any long-term capital asset except a residential house — shares, equity MF units, land, gold, commercial property, unlisted securities.
Condition: NRI must not own more than one residential property in India on the date of sale (excluding the property being purchased).
Investment: invest the entire sale proceeds in one new residential property — purchase within 1 year before or 2 years after sale; or complete construction within 3 years.
Exemption amount: if 100% of sale consideration is invested → 100% of LTCG is exempt. If only part is invested → proportional exemption (invested amount ÷ sale consideration × LTCG).
CGAS account: if the ITR deadline comes before the purchase/construction is complete, deposit the unutilised amount in a Capital Gains Account Scheme (CGAS) bank account.
Section 54F vs Section 54 vs Section 54EC
Section 54: applies when an NRI sells a residential house and buys another — exempts LTCG equal to reinvested amount.
Section 54F: applies when an NRI sells any other long-term asset and buys a residential house — requires reinvesting the full sale consideration.
Section 54EC: exempts LTCG on property sale by investing in REC/NHAI bonds — maximum ₹50 lakh, 5-year lock-in.
Best strategy: evaluate 54F if you are selling shares or land and plan to buy a home; 54EC if you want a simpler bond investment with no property purchase required.
Frequently asked questions
Can an NRI use Section 54F for equity share capital gains?
Yes. Selling equity shares held long-term and reinvesting the full sale proceeds in a new residential property in India qualifies for Section 54F LTCG exemption.
What happens if I sell the new property within 3 years?
If the new property bought under 54F is sold within 3 years of purchase (or 3 years from construction completion), the exempted LTCG from the original sale becomes taxable in the year of sale of the new property.
Can the new property be bought jointly?
The exemption requires the NRI to be the buyer — joint purchase is generally accepted as long as the NRI is a buyer. The entire 54F investment should come from the NRI's sale proceeds.