Want to buy a house by redeeming mutual fund investments? Income tax rules explained

I am considering buying a residential apartment by investing the redemption proceeds from my mutual fund investment. Will I be eligible for the capital gains exemption if I reinvest the redemption proceeds for the purchase of the second residential apartment because I already have a residential house in my name? What is the period of investment in residential real estate from the date of redemption of the mutual fund? Can I apply for this exemption again if I had already applied for an exemption earlier for the purchase of the first home?

Answer: Section 54F of the Income Tax Act allows an individual and a HUF to claim an exemption for long-term capital gains resulting from the sale of an asset other than a house property if the net sale consideration received on the sale of such asset is invested to purchase a property of a residential property within a specified time period subject to the fulfillment of certain conditions. This exemption can only be claimed if you do not own more than one house on the date of the sale of the goods.

Since you only have one home other than the one designated to save capital gains tax, you can claim an exemption under Section 54F if you invest the proceeds from the redemption of your mutual fund investments to buy second home. I assume that all of your mutual fund investments have become long-term.

The proceeds from the sale must be invested to purchase a dwelling house within two years of the sale of the mutual fund investments. You can also build a dwelling house yourself or reserve a property under construction and obtain construction completed or possession within three years from the date of sale of your mutual fund investments. The amount remaining unused as of July 31 of the following financial year, i.e. the due date for depositing your ITR, must be deposited into the Capital Gains Account Scheme by that date.

Yes. you can claim this secondary residence exemption even if you have already claimed a similar exemption before.

Balwant Jain is a tax and investment expert and can be contacted at [email protected] and @jainbalwant on Twitter.

To subscribe to Mint Bulletins

* Enter a valid email

* Thank you for subscribing to our newsletter.

Comments are closed.