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, ET Online|

Dec 29, 2025, 03:26:22 PM IST

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Mutual fund redemption

Are you planning to redeem your mutual fund units to finance a house purchase in Pune, and also intend to sell a house you own in your village, wondering if you can still claim long-term capital gains (LTCG) tax exemption? Here’s what an expert says, as reported by ETWealth.

ETMarkets.com

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LTCG tax exemption

If you redeem long-term mutual fund units to buy a house, relief is available under Section 54F, as the asset sold is not a residential property, according to Sudhir Kaushik, Co-founder & CEO of TaxSpanner.

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Only condition

Kaushik says that if you meet the Section 54F conditions -- specifically, the requirement that you should own only one residential house on the date of the mutual fund sale -- you can claim LTCG exemption even if the house is not sold later. Eligibility is determined by the mutual fund sale date, not by any subsequent property sales.

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Condition to claim

To claim exemption, invest the net sale proceeds in one residential house in India, purchased within a year before or two years after the mutual fund sale, or constructed within three years.

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Net consideration is important

If the net consideration is fully invested, you will get full exemption. If not, the exemption is proportionate. If any amount remains unutilised by the return filing due date, deposit the balance in the Capital Gains Account Scheme (CGAS) before filing, the expert said.

IANS

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Only condition

The expert says, “Do not buy or construct another house in the next 2–3 years, or the exemption may be withdrawn.”