This discussion clarifies the definition of a 'residential house' for claiming exemption under Section 54F of the Income Tax Act. A key condition is not owning more than one residential house (excluding the new purchase) at the time of selling the original asset. The consensus is that a vacant residential plot is not considered a residential house for this purpose. Therefore, owning one residential flat and a vacant plot would still make you eligible for the Section 54F exemption when investing capital gains into a new residential house.
One of the important condition for availing exemption under Section 54F is that the taxpayer should not own more than one residential house other than the new property, at the time of the sale of the original asset.
What is the definition of residential house in the above condition? Does a residential plot (vacant land) is considered as residential house? For example, at the time of the sale of the original asset, if a person owns one residential house (residential flat) and a residential plot (vacant land with no plans of constructing the house or leasing the land in next 5+ years) and wants to invest long term capital gains in buying another residential house, will they be eligible for availing exemption under Section 54F? Please guide