I bought an apartment in 2022 with a home loan. This year I have sold equity MF holdings with gains of about ₹60 lakh. Can I use the capital gains to pay off the home loan and get exemption under Sec 54F? I own just this one house, fulfilling the 54F condition.
—Name withheld on request
You would not be eligible to claim the exemption under Section 54F against the capital gains on sale of units of mutual funds on repayment of a housing loan, as the residential property was acquired more than one year before the date of transfer of the .
While repayment of a housing loan undertaken for purchase of a residential house can be considered towards exemption under Section 54F, such exemption is available only if the residential property is acquired within one year before or two years after, or constructed within three years after, the date of transfer of the asset whose gains are sought to be exempt.
In your case, as the property was acquired in 2022, it would not satisfy this condition and therefore, the exemption would not be available.
Available deductions
However, while the capital gains would not be exempt, you may still be eligible for deduction under Section 80C in respect of the principal amount of repayment of the loan, within the overall threshold of ₹1.5 lakh. This deduction is available only if you are opting to be taxed under the old tax regime.
Further, under the old regime, you are also eligible for deduction of interest under Section 24 in respect of a self-occupied property, up to a limit of ₹2 lakh.
Mahesh Nayak, chartered accountant, CNK & Associates.
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