What is the maximum amount of exemption allowed under section 54F?

Ans.  The maximum amount of exemption allowed under s​ection 54F is as follows:

a) If net consideration is invested in new house property: If net consideration arising from the sale of the original asset is fully utilised to purchase or construct a residential house or deposited in a Capital Gains Account Scheme, the entire capital gain will be exempt from taxation.

b) If partial consideration is invested in new house property: If net consideration arising from the sale of the original asset is not fully utilised to purchase or construct a residential house or deposited in a Capital Gains Account Scheme, the exemption will be granted in proportion to the amount invested, as follows:

A x B/C

Wherein,

A = Investment in residential house plus amount deposited in capital gain account scheme. However, the total amount cannot exceed Rs. 10 crores [1] (Refer Note)

B = Long-term Capital Gains

C = Net consideration from transfer of original asset

Note: If the total amount invested in the new house property and the amount deposited in the Capital Gain Account Scheme exceeds Rs. 10 crores, the threshold limit will be adjusted first with the amount invested in the new house property. If the investment in the new house property is less than Rs. 10 crores, the remaining balance will be considered to be from the Capital Gain Account Scheme.

[1] Inserted by the Finance Act, 2023 with effect from assessment year 2024-25. Earlier, there was no threshold limit for making investment in new house property and depositing amount in capital gain account scheme.​