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Can we buy 2 residential house (flat) to save Capital gain tax using section 54F

28 February 2024

Hi,

I work in MNC. Company provided the shares to the employees. These shares are listed in US NASDAQ market. Suppose, I want to sell some shares after long time. After selling the shares, I get the Long term Capital gain. Now, I want to purchase house in India using the money. I got to know that I can get the tax benefit If I purchanse the house using Capital gain money under section 54F. As of now, I dont have the house. My questions are:

1. Can I buy 2 houses using this money to gain the tax benefit using the section 54F?

2. Does the registry amount, Noida authority tranfer charges, Broker charges, interior design charges and any other charges also comes under the purview of section 54F?

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4 Replies

Yasaswi Gomes new (Finance ) (4492 Points)
Replied 29 February 2024

Let’s delve into your questions about capital gains, selling ESOPs, and the tax benefits under Section 54F.

Selling ESOPs and Buying a House:
- ESOPs (Employee Stock Ownership Plans) are typically considered as long-term capital assets. If you sell your ESOPs and make a profit (capital gain), you can use the proceeds to buy a residential house and potentially claim tax benefits under Section 54F.
- Section 54F provides an exemption from capital gains tax when you invest the sale proceeds from a long-term capital asset (other than a residential house) into purchasing or constructing a new residential property.
- Here are the key conditions for availing this exemption:
  1. You must be an individual or a Hindu Undivided Family (HUF).
  2. The capital gain should arise from the transfer of any long-term capital asset (except a residential house).
  3. You can invest the net consideration (sale proceeds minus any expenses related to the transfer) in either of the following ways:
    - Purchase one residential house in India within 1 year before or 2 years after the date of transfer.
    - Construct one residential house in India within 3 years from the date of transfer.
- Important Note: If you already own more than one residential house on the date of transfer, you won’t be eligible for this exemption.
Expenses Covered Under Section 54F:
- The expenses that come under the purview of Section 54F include:
  - Registry Amount: Yes, the amount paid for property registration is covered.
  - Noida Authority Transfer Charges: These charges are also eligible for exemption.
  - Broker Charges: Brokerage fees incurred during property purchase can be considered.
  - Interior Design Charges: Expenses related to interior design may qualify.
  - Other Charges: Any other expenses directly related to the purchase or construction of the residential house can be included.
- Remember that these expenses should be part of the net consideration (i.e., deducted from the sale proceeds) when calculating the amount to be reinvested for claiming the exemption.

Keep in mind that tax laws can be complex, and it’s advisable to consult a tax professional or chartered accountant for personalized advice based on your specific situation. 🏠📊

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sabyasachi mukherjee (27117 Points)
Replied 03 March 2024

Yes you can buy house

Sushil Kumar Srivastava (10 Points)
Replied 04 March 2024

Thanks for the reply.

My Question was regarding how many homes can I buy? Can I buy 2 house?

Sushil Kumar Srivastava (10 Points)
Replied 04 March 2024

Thanks Yasaswi ji for detailed answer.

As per your answer, it looks like that we can use section 54F for only 1 house. So suppose I get some Long Term Capital gain (X) and bought a house of amount Y ( where Y < X ). What are the option for me to save the tax?

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