By IndiaHub 
I am a homemaker, aged 58. In December 2024, I sold a residential plot for Rs 17.4 lakh, which I had purchased in 1989 for Rs 22,000. I would like to know my tax liability on this sale. Also, please advise on the available options to save on capital gains tax. For now, I have parked the entire amount in two fixed deposits. I would appreciate your guidance.
Umesh Kumar Jethani Founder, ApkiReturn: You made an LTCG from the sale of your plot in December 2024. For 2024–25, you can calculate tax in two ways. If you opt for 20% tax with indexation, and use the actual cost of Rs 22,000 (purchase year 1989), the indexed cost becomes Rs 79,860 (cost inflation index 100 in 2001–02 and 363 in 2024–25). The resulting LTCG is Rs 16,60,140, and tax at 20% comes to Rs 3,32,028 (plus 4% cess). Alternatively, without indexation, LTCG is Rs 17,18,000 and tax at 12.5% amounts to Rs 2,14,750 (plus cess), which results in a lower tax burden. To reduce this liability further, under Section 54EC, you can invest up to Rs 50 lakh of the gains in notified bonds like NHAI or REC within six months (by June 2025). Under Section 54F, investing the entire sale proceeds of Rs 17.4 lakh in a new residential property (within one year before or 2 years after the sale, or constructing within 3 years) will also qualify for proportionate exemption, provided you own no more than one other house. Note that fixed deposits do not offer any tax exemption on capital gains. If you are unable to invest before filing your return (by 31 July 2025), deposit the amount in a Capital Gains Account Scheme (CGAS) to remain eligible for exemptions.
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I booked a flat in February for Rs 1.5 crore. I plan to take a home loan of Rs 1.1 crore and cover the balance by selling stocks across 2024–25 and 2025–26. While I don’t intend to use mutual fund investments for other expenses, does it make sense to sell them purely for tax harvesting and then repurchase the same units? Also, while filing my income tax return for 2024–25, how should I report the LTCG if the proceeds were used to buy the house? Can I claim an exemption under Section 54F or any other applicable Section?
From an income tax perspective, tax harvesting— where mutual fund units are sold to realise long-term capital gains (LTCG) up to the exemption limit or to reset the acquisition cost—is a permissible strategy, provided the transactions are genuine, executed at market value, and not intended to avoid tax through artificial losses or wash sales. As for exemption under Section 54F of the Income Tax Act, 1961, it can be availed of on LTCG arising from the sale of a long-term capital asset other than a residential house if the net sale consideration is invested in purchasing or constructing a house within the prescribed timeline, that is, a year before or two years after the date of transfer (or three years in case of construction). As the flat was booked in February and the mutual fund sales are spread across 2024–25 and 2025–26, you may be eligible for exemption under Section 54F for the portion of the net consideration used toward the purchase of your flat, provided you meet other conditions too. While filing your 2024–25 return, you must report the LTCG from mutual fund redemptions in the Capital Gains Schedule. Thereafter, you can claim the proportionate exemption under Section 54F based on the actual investment made toward the property.
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