Section 54F exemption is applicable even if you take a home loan to buy your new property and not utilise the entire sale proceeds from your sale / MF sale to buy the new house. For example, you sold MF worth 30 lakhs and then bought a 50 lakhs house with 10 lakhs as down-payment from your own pocket and 40 lakhs as home loan. Here the 54F exemption is still applicable on the entire 30 lakhs of MF sale and not just on the 10 lakhs down-payment. Source: here