For Meena, the decision was emotional.
Years of carefully saved gold—bangles gifted at her wedding, chains bought during better times—were sold to fund what mattered most: a permanent home for her family.
She sold her long-term jewellery, earned capital gains, and reinvested most of the money into a new residential house. Her advisor told her she could claim exemption under Section 54F.
Relieved, Meena moved into her new home.
But the tax story didn’t end there.
The ₹5 Lakh Decision That Changed Everything
After paying the builder and registration charges, Meena still had ₹5 lakhs left from the jewellery sale.
She thought:
“I’ve already bought the house. I’ll keep the balance in my savings account and use it later.”
She filed her Income Tax Return (ITR) claiming full exemption under Section 54F.
Months later, an intimation arrived.
The ₹5 lakhs was taxed as long-term capital gains.
Why Selling Jewelry Triggers Capital Gains Tax
Many taxpayers assume jewelry is “personal” and tax-free. That is a costly misunderstanding.
When jewelry is held for more than 36 months, it becomes a long-term capital asset. Any gain on sale is taxable, unless properly exempted.
Section 54F allows exemption only if strict conditions are met.
The Rule Meena Missed Under Section 54F
Section 54F is not just about buying a house.
It is also about where unutilized money is kept.
If capital gains are not fully utilized for purchase or construction of a house before the due date of filing ITR (u/s 139(1)), then:
👉 The unutilized amount must be deposited into the Capital Gains Accounts Scheme (CGAS) 👉 Keeping it in a savings account does not qualify 👉 Even if the house is already purchased
Meena skipped the CGAS deposit.
Why a Savings Account Breaks the Exemption
A normal savings account:
- Is treated as free-use money
- Does not lock funds for housing purposes
- Has no legal linkage to Section 54F
As a result, the Income Tax Department treated the ₹5 lakhs as non-compliant capital gain.
The exemption was lost—permanently.
What Meena Should Have Done
Before filing her ITR, Meena should have:
✔ Deposited the ₹5 lakhs into a CGAS account ✔ Mentioned CGAS details in her tax return ✔ Withdrawn the money later for eligible housing use
This single step would have protected her Section 54F exemption.
A Lesson for Every Taxpayer
Selling jewellery to buy a house is common in India.
But Section 54F rewards compliance, not intention.
Meena did everything right— Except one procedural requirement.
And that one miss resulted in:
- Capital gains tax
- Interest
- Mental stress
Buying a house is not enough. Parking unutilized capital gains in CGAS before filing ITR is mandatory.
If you are selling jewellery, shares, land, or any long-term asset to buy a house— plan the CGAS deposit before the ITR deadline.
