Section 54F Unused Funds: Is Your LTCG Exempt?

If you sold a non-residential asset and claimed LTCG exemption under Section 54F, you must reinvest in a house within the deadline — or pay full capital gains tax on unused funds parked in the Capital Gains Account Scheme.

Here's what happened: Section 54F exempts Long Term Capital Gains on non-residential assets like stocks or plots if you buy or build a residential house within set deadlines.. Unused LTCG amounts must be deposited in a Capital Gains Account Scheme (CGAS) at a bank before the ITR filing deadline to protect the exemption temporarily.. If funds parked in CGAS are not used for a qualifying house purchase within 2 years (or 3 years for construction), the exemption is reversed and full tax becomes payable..

What you should do: Check your CGAS account balance and match it against your reinvestment deadline — missing it triggers full LTCG tax plus interest under Section 234B.. File your ITR before the due date and deposit unused capital gains in CGAS at SBI or any scheduled bank before filing to legally protect your exemption.. Consult a CA if your reinvestment deadline is approaching — partial use of CGAS funds gives only proportionate exemption, not full relief on the original gain..

If you withdraw CGAS funds for any purpose other than a qualifying home purchase, the entire withdrawn amount becomes taxable as LTCG in that financial year — even if you reinvest it elsewhere.