Section 54F of the Income Tax Act

Income-tax Act, 2025: s.86

Section 54F of the Income-tax Act, 1961 corresponds to section 86 (Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house) of the Income-tax Act, 2025.

Read section 86 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 54F is CIT v. Zoom Communication (P) Ltd. (327 ITR 510), cited in 330 of the 2,628 judgments on BharatTax that turn on this section.

Leading authorities on Section 54F

CIT v. Zoom Communication (P) Ltd.
327 ITR 510 · 2010 · High Court
330
citing judgments

Penalty under section 271(1)(c) is not leviable for legally unsustainable claims if the assessee provides a substantiated, bona fide explanation without concealing facts or giving incorrect information. However, penalty is attracted if a claim is baseless, legally incorrect, and the explanation lacks bona fides.

Mysore Minerals Ltd. v. CIT
239 ITR 775 · 1999 · Supreme Court
215
citing judgments

For income tax purposes, the 'owner' of a property is the person who is entitled to receive income in their own right, bears the risks incidental to ownership, and utilizes the asset, even if the sale deed is not formally registered. This beneficial ownership is sufficient for claiming depreciation or capital gains exemption under relevant sections.

Sanjeev Lal v. CIT
365 ITR 389 · 2014 · Supreme Court
122
citing judgments

For claiming capital gains exemption under beneficial provisions like section 54, the 'date of transfer' can be the date of the agreement to sell, particularly when coupled with substantial advance consideration or an enforceable right, adopting a purposive and liberal interpretation to acknowledge the assessee's intent.

CIT v. Manjula J. Shah
355 ITR 474 · 2013 · High Court
113
citing judgments

For capital assets acquired by gift or will, the indexed cost of acquisition under Section 48 is computed with reference to the year the previous owner first held the asset. The period of holding for determining if an asset is long-term also includes the previous owner's holding period, as per Section 2(42A).

CIT v. Escorts Finance Ltd.
328 ITR 44 · 2010 · High Court
108
citing judgments

An assessee is liable to penalty under Section 271(1)(c) read with Explanation 1 if they make a claim that is incorrect in law, wholly without basis, and the explanation furnished for such a claim is not bona fide.

CIT v. K.G. Rukminiamma
331 ITR 211 · 2011 · High Court
104
citing judgments

For capital gains exemption under Sections 54 and 54F of the Income Tax Act (prior to the 2015 amendment), the expression "a residential house" includes multiple residential units and should not be construed in the singular, by applying Section 13 of the General Clauses Act.

CIT v. D. Ananda Basappa
309 ITR 329 · 2009 · High Court
97
citing judgments

For exemption under Section 54, the expression 'a residential house' allows for investment in multiple residential units that form one functional unit, as 'a' does not imply a singular number. The amendment to Section 54, effective from April 1, 2015, is prospective.

CIT v. Ramkrishna Deo
35 ITR 312 · 1959 · Supreme Court
84
citing judgments

The burden of proving that a particular income is exempt from taxation, or is not taxable, lies on the assessee. To claim an exemption or a deduction, the assessee must provide proper materials to establish eligibility.

CIT v. Gita Duggal
357 ITR 153 · 2013 · High Court
77
citing judgments

For capital gains exemption under sections 54 and 54F, the term "a residential house" does not restrict the exemption to a single residential unit and can include multiple contiguous or combined residential units treated as one house.

CIT v. Kamal Wahal
351 ITR 4 · 2013 · High Court
71
citing judgments

An assessee is eligible for capital gains exemption under Sections 54 and 54F even when the new residential house is purchased in the name of their spouse, provided the investment comes from the assessee's own funds. This allows for a purposive construction of these provisions.

Judgments on Section 54F

Shri Ashokkumar Bhavarlal, Bangalore vs. The Income Tax Officer Ward-1(2)(2), Bangalore

In the result, the appeal of the assessee is allowed on the preliminary ground of limitation

ITA 1541/BANG/2018[2013-14]Status: DisposedITAT Bangalore02 Mar 2021AY 2013-14

Bench: Shri N. V. Vasudevan & Shri Chandra Poojariassessment Year : 2013-14 Shri. Ashok Kumar Bhavarlal, Vs. Income Tax Officer, Prop: Ashok Bankers, Ward – 1(2)(2), #238, Thimmaiah, Road, Bengaluru. Bengaluru – 560 005. Pan : Aaopb 3451 A Appellant Respondent Assessee By : Shri. Shivaprasad Reddy Revenue By : Shri. Pradeep Kumar, Cit(Dr)(Itat), Bengaluru Date Of Hearing : 25.02.2021 Date Of Pronouncement : 03.03.2021 O R D E R Per N. V. Vasudevan: This Is An Appeal Filed By The Assessee Against The Order Of Pr. Cit, Bengaluru-1, Bengaluru, Passed Under Section 263 Of The Income Tax Act, 1961 (The ‘Act’), Relating To Assessment Year 2013-14. 2. The Assessee Is An Individual. In An Order Of Assessment Concluded Under Section 143(3) Of The Act For Assessment Year 2013-14 Dated 29.09.2015 In The Case Of The Assessee, A Sum Of Rs.4,23,825/- Was Added To The Income Declared In The Return Of Income Under The Heard “Capital Gains”. The Cit In Exercise Of His Powers U/S.263 Of The Act Was Of The View That The Aforesaid Order Of The Ao Allowing Deduction To The Assessee Under Section 54/54F Of The Act While Computing Capital Gain Was Erroneous & Page 2 Of 5

For Appellant: Shri. Shivaprasad ReddyFor Respondent: Shri. Pradeep Kumar, CIT(DR)(ITAT), Bengaluru
Section 143(3)Section 263Section 54

Shri Gulab Chand Meena, Jaipur vs. Assistant Commissioner of Income Tax (OSD), Jaipur

In the result, appeal of the assessee is allowed

ITA 49/JPR/2018[2011-12]Status: DisposedITAT Jaipur28 Jan 2021AY 2011-12

Bench: Shri Sandeep Gosain, Jm & Shri Vikram Singh Yadav, Am Vk;Dj Vihy La-@Ita No. 49/Jp/2018 Fu/Kzkj.K O"Kz@Assessment Year :2011-12 Cuke Shri Gulab Chand Meena, A.C.I.T.(Osd), Vs. Village- Dantali, Tehsil- Range-7, Sanganer, Jaipur. Jaipur. Lfkk;H Ys[Kk La-@Thvkbzvkj La-@Pan/Gir No.: Abupm 2026 R Vihykfkhz@Appellant Izr;Fkhz@Respondent Fu/Kzkfjrh Dh Vksj Ls@ Assessee By : Shri Manish Agarwal (Ca) Jktlo Dh Vksj Ls@ Revenue By : Smt. Monisha Choudhary (Addl.Cit) Lquokbz Dh Rkjh[K@ Date Of Hearing : 11/01/2021 Mn?Kks"K.Kk Dh Rkjh[K@ Date Of Pronouncement : 28/01/2021 Vkns'K@ Order Per: Sandeep Gosain, J.M. This Is An Appeal Filed By The Assessee Against The Order Of Ld.Cit(A)- 3, Jaipur Dated 06/12/2017 For The A.Y. 2011-12 In The Matter Of Order Passed U/S 143(3) Read With Section 147 Of The Income Tax Act, 1961 (In Short, The Act), Wherein Following Grounds Have Been Taken. “1. On The Facts & The Circumstances Of The Case The Ld. Cit(A) Erred In Confirming The Disallowance Of Deduction U/S 54F Of Rs. 5,78,571/- Made By Ld.Ao Arbitrarily & Accordingly Treating It As A Long Term Capital Gain When All The Conditions Prescribed U/S 54F Were Fulfilled By Assessee. 1.1. That The Ld. Cit(A) Has Further Erred In Not Considering The Fact That Assessee Had Submitted The Valuation Report In Support Of His Claim Of 2

For Appellant: Shri Manish Agarwal (CA)For Respondent: Smt. Monisha Choudhary (Addl.CIT)
Section 139(1)Section 143(3)Section 147Section 148Section 4Section 54F