Capital Gain

[Ethirajan Parthasarathy]

A resident of India, holds shares in a foreign company. He wishes to sell the such shares and re-invest the sale proceeds in a residential property (his first property) in India and claim exemption u/s 54F.

My opinion is, it is possible. Can experts’ comment on my view.

[PRIYACHARAN SR]

"My Opinion"

In your context, to determine the eligibility, we need to verify the definition of long term capital asset as per Section 54 F "Capital gain on transfer of certain. capital assets not to be charged in case of investment in residential house".

Section 54F defines long term capital asset as "Where, in the case of an assessee being an individual, the capital gain arises from the transfer of any long-term capital asset, not being a residential house". Since the bare act uses the phrase any long -term asset, not being a residential house, Shares held in foreign company is an eligible long term capital asset to claim deduction u/s 54F (assuming the holding period criteria is satisfied in your scenario).

Hence you may invest the sale proceeds in residential house property and shield your capital gain arising under section 54F.

AI Summary

Capital gain exemption: Reinvestment of proceeds from sale of foreign shares into first residential house may qualify under section 54F. Shares of a foreign company qualify as a long term capital asset for purposes of the reinvestment exemption where the holding period criteria for long term status are met; accordingly, reinvestment of the sale proceeds in a residential property (the assessee's first house) in India can enable claiming the capital gain exemption, subject to the prescribed eligibility and holding period requirements for the exemption.