Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether Benefit Of Section 54F Is Available If Invested In One Residential House By Selling Two Properties?

QUERY: X is the owner of a flat, and he is also a co-owner in another flat with his wife. They wish to sell both these flats and invest the proceeds in a larger apartment,. X wishes to know whether such joint investment in one flat will be sufficient for capital gains exemption.
ANSWER: Yes. The main purpose of section 54 of the Income tax Act, 1961 is to give relief in respect of profits on the sale of a residential house. Section 54F of the Act, provides that where any capital gains arises from the transfer of any long term capital asset, other than residential house and the assessee purchases within one year before or after the date on which the transfer took place or construct within a period of three years after the date of transfer, a residential house the capital gain arising from the transfer would be exempt as per the aforesaid sections.

So, if X and his wife sell these properties and buys one big flat jointly for the purpose of their residence, then, they are entitled for exemption under section 54 or section 54F of the Act, in respect of investment made in residential house [see DCIT vs. Ranjit Vithaldas – 23 taxmann.com (ITAT (Mum)].
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One comment on “Whether Benefit Of Section 54F Is Available If Invested In One Residential House By Selling Two Properties?
  1. Hariharan Ramasubramanian says:

    I own two vacant residential lands in different localities of Bangalore and am in the process of selling both of them. Can I avail exemption from Capital Gains Tax if I invest the Combined Net Consideration from both the plots in a house property within the specified time limit? If yes, when does the time start; from the sale of first property or the second one? I already own a house property in the city. Are there any case laws dealing with this issue?

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