LTCG on House and benefit of Sec 54

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This discussion clarifies the rules around claiming Section 54 relief for Long Term Capital Gains (LTCG) tax when selling multiple properties. While you can sell multiple houses, the benefit of Section 54 is generally restricted to an investment in one new residential property. There's a lifetime option to purchase up to two properties if the capital gain is under £2 crore, but this cannot be split across different financial years for separate sales within the same financial year.

Naveen Kumar Jain

Naveen Kumar Jain (Querist)

13 August 2021 A owns multiple houses. He sells 2 houses in this financial year and has capital gain on both. He had purchased a house in last financial year with in a period of 12 months of the sale of first house, so he takes benefit of sec 54 against capital gain on first house sold. He buys another house in next financial year and invests capital gain on second house in the new purchase. Will he get benefit of sec 54 on investment of the new purchase made in next financial year, being investment made with in 2 years of sale?
I think the answer is in negative, reason being, Capital gain on both houses has arisen in the current financial year and must be offered to tax this year. The benefit of sec 54 can be taken this year, while offering capital gain to tax. Sec 54 benefit is on purchase of ONE property only and not on 2 properties, and is not separately for each property i e not property wise with in a financial year. Please advise if I am correct?

CMA Poornima Madhava

CMA Poornima Madhava (Expert)

13 August 2021 I think exemption u/s 54 can be claimed in respect of sale of only ONE residential property.
Further, if the capital gain is up to Rs.2cr, 2 houses can be purchased/constructed. But this option can be exercised only once in the lifetime of the assessee.

Naveen Kumar Jain

Naveen Kumar Jain (Querist)

13 August 2021 Sale of multiple properties is not restricted, but section 54 benefit can be claimed for investment in one house only, except where LTCG is less than 2 crores as pointed out by you (one time option). My query was in respect of investment made in 2 houses in different financial years.