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Capital gain in case of ownership of more than two houses

Suraj (819 Points)

20 December 2015

Dear Sir / Madam,

I wish to know availability of exemption in case of long term capital gain in case of sale of right of resiential house.

A person, already owning 2 residential houses, sells his right in 3rd under-constructed residential house. There is a long term capital gain on sale of this right. Now he wants to buy new house.

In this case, Whether exemption u/s 54 is available to him eventhough he already owns 2 residential houses?

Kindly revert.

Thanks

Suraj

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15 Replies

Karthik.V.Kulkarni (Chartered Accountant) (594 Points)
Replied 20 December 2015

No he cant claim benifit u/s 54. Capital gains will be chargeable to tax.

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ashiq (pp) (22 Points)
Replied 21 December 2015

No . contion to claim section 54 says only one residential house property is to be owned at the time of selling 2nd home . so here such exemption cannot be claimed

Harish Pathak (.) (64 Points)
Replied 21 December 2015

The condition that assessee should not own more than one residential house (other than new house) is for sec 54F. There is no such condition u/s 54 . So u can claim under this section.

E V RAMA KRISHNA (CHARTERED ACCOUNTANT) (361 Points)
Replied 21 December 2015

one house condition is applicable only for Sec 54F.

Ravi Soni (Executive in Corporate Advisory) (54 Points)
Replied 21 December 2015

According to section 54, Where capital gain arises from transfer of long term RHP and assessee purchases or constructs ONE RHP in India, the amount of capital gain invested in new RHP is not chargeable to tax. Here no conditional reference to existing property has been made.

Therefore, exemption will be available eventhough assessee owns other RHP.

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Suraj (819 Points)
Replied 21 December 2015

Thanks All.

So the conclusion is that, even if assessee owns two residential houses and wants to sell third house and again wants to buy 4th new house, and if there is long term capital gain, then the assessee can claim, satisfying all other conditions, exemption u/s 54 in respect on long term capital gain arising on account of sale of 3rd residential house. Right.

Ankit Taprania (CA FINAL ) (542 Points)
Replied 21 December 2015

well , i DON'T THINK so .

Exemption u/s 54F definately will not be available , BUT exemption u/s 54 will ALSO NOT BE AVAILABLE .

Please and please and PLEASE , concentrate on what capital asset have been sold .

exemtion u/s 54 will be available when you have sold capial asset = residential house .

but you have not sold residential house, you have sold RIGHT in residential house.

Selling of right in house property does not mean selling of house property.

People treat the sale of an under construction flat as equal with a residential house for the purpose of claiming long term capital gains exemption which is also incorrect and may result in litigation and substantial tax demand, interest and penalty . it is not the sale of house property but it is sale right in house property. it will become your property when you have either taken the possession or registration

so please before saying anything TOTALLY CONCENTRATE ON what capital asset have been sold/ purchased.

2 Like

Stranger (.) (5531 Points)
Replied 22 December 2015

Absolutely...100% agreed with Mr. Ankit Taprania...

Tony John (Chartered Accountant) (6085 Points)
Replied 22 December 2015

If RIGHT in residential house is transferred no benefit of Section 54 can be availed. Moreover, there is no stipulation in Section 54 that assessee should own not more than 1 house at the time of transfer.

For details, please go through the following link:

/articles/understanding-section-54-25676.asp

Suraj (819 Points)
Replied 22 December 2015

Thanks all for making this discussion more meaningful.

with reference to Mr Ankit's reply, I am sharing a link which also states that Section 54 capital gain exemption is not available where there is sale of right and not a residential house.

https://www.moneycontrol.com/master_your_money/stocks_news_consumption.php?cat=realestate&autono=1767461

Regards,

Suraj

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pankaj gianani (COUNTRY HEAD) (22 Points)
Replied 11 September 2017

So Ankur help me understand. In this case the person has 3 flats and he is selling his shares of the flat (called as the flat) to another buyer. Can he invest the indexed capital gains into a purchase of another property ? or does he need to invest the capital gains in long term capital gains bonds or pay the capital gains tax.

TIMMAPPA (PROPRIETOR) (24 Points)
Replied 06 July 2018

YES Sale of right on udner constructed flats is not equivalent to the sale of residential property. Hence the exemption under section 54 and 54F is not available on the sale of right.

Secondly under section 54 there is not requirements to have single house on the date of sale unlike section 54F wherein required that the more than one house (other than one is bought) cannot owned on the date of sale

Sukrit Saha (6 Points)
Replied 23 March 2022

Let me try to simplify the issue that is bothering me. We, wife and I , co own two flats. Both are more than 19 and 8 years old.

The 19 year old is sold off on 22nd Feb 2022. Capital gains of Rs 92 lacs accrued, after indexation.

Now, is it possible to apply and co own a flat again( apply in Mar22 and May 24 possession.) for total consideration of around Rs 90 lacs ( to be paid in stages till 2024 possession) and get Capital Gains tax exemption for the full amount? Inspite of jt owning the other flat that is 8 years old and self occupied.

If not, then we plan to but Bonds under 54EC for 46 lacs each and avoid Capital Gains Tax fully. ( Within stipulated time).

Please educate a sr citizen learner like me.

Thanks to everyone who helps/ clarify.