Sec 54

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 July 2013 hai i need a clarification on sec 54 regarding.we are having 3 residential house properties and sold one of them and invested these proceedings in construction of another house property,can we claim exemption under sec 54.what if the new construction is a agricultural form house.

Anil Sankar V

Anil Sankar V (Expert)
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12 July 2013 yes, it is claimable in the above scenario even in case of farm house.

Querist : Anonymous

Querist : Anonymous (Querist)

13 July 2013 Sir is there any limt on no.of residential house properties (like only one)to be held in the name of the assessee.as it becomes in total 4 residential properties if we bought a new house with the sale proceeds.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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23 July 2025 ### **Section 54: Exemption on Sale of Residential Property**

To clarify your queries:

1. **Sale of One Property and Purchase of Another**:
Under **Section 54**, you are eligible for an exemption on **capital gains** if the proceeds from the **sale of a residential property** are **invested in the construction** or **purchase of another residential property**.

2. **Agricultural Farm House as a New Property**:
The new property purchased with the proceeds should be a **residential house** for the purposes of Section 54. If you use the proceeds to **construct a farm house** (which is not primarily residential but more of an agricultural property), **Section 54 exemption would not apply**.

**Reason**: A **farm house** does not qualify as a "residential property" under the provisions of **Section 54**, and the exemption is only available for the purchase or construction of a **residential house**.

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### **Limitation on the Number of Residential Properties**:

Regarding your second query about the **number of residential properties**:

* **Section 54** does not impose any **limit** on the number of **residential properties** an individual can own.

* However, the **exemption** under Section 54 is applicable **only on the reinvestment of the proceeds from the sale of one residential property** into another **residential property**.

#### **Key Points**:

* You can sell **one residential property** and purchase **one residential property** under Section 54.
* If you have **3 residential properties** and sell one, you are still **eligible** for the exemption on the reinvestment of the sale proceeds in **another residential property**.

#### **Important Consideration**:

* If you have more than one **residential property** (as in your case, you already own 3), the exemption under **Section 54** will still be available as long as the criteria are met.
* **No cap on the number of residential properties** you can own. However, Section 54 applies specifically to **capital gains from the sale of a residential property**, and the proceeds must be reinvested in **another residential property**.

### **Summary**:

* **Claiming exemption under Section 54** is possible even if you own multiple residential properties, as long as the **proceeds from the sale of one residential property** are reinvested in **another residential property**.
* **Farm houses** will not qualify for the exemption if they are not considered a residential property as per the definition under tax laws.

If you have more questions or need further clarification, feel free to ask!

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