Where only part of the net sale consideration of a long-term capital asset (not a residential house) is invested in one residential house, the exemption under section 54F equals:
AThe full capital gains, whenever any amount at all stands invested
BCapital gains times amount invested over net sale consideration
CThe exact amount invested in the new residential house purchased
DCapital gains minus the amount of consideration left uninvested
Answer & Solution
Correct answer: B. Capital gains times amount invested over net sale consideration
1. Section 54F exempts LTCG on any capital asset other than a residential house when the NET SALE CONSIDERATION is reinvested in one residential house in India.
2. Full exemption needs the entire net consideration invested; partial investment gives proportionate relief.
3. The formula is: LTCG x amount invested / net sale consideration (investment and deemed cost capped at Rs 10 crore).
4. Option C states the section 54 measure (lower of gains and cost of new house); under 54F the base is consideration, not gains — the classic distinction between the two sections.
_Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 4 Capital Gains, PDF p. 76_
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