Section 54 exemption :
This query is : Resolved
22 June 2009
Please update me on the following issue.
I had a Long term capital gain (on transfer of Residential house) during F.Yr 2008-09, However since i bought a new residential house during 2008-09 at a cost which is more than my Capital gain during 08-09 i need not pay any tax on CG. Now If i sell another residential house during F.yr 2009-10 & if that results in Long term capital gain, can i claim the difference amount (F.yr 08-09 Cost of new asset - Capital Gain exempt)as exemption u/s 54 during F.Yr 2009-10. (Since section stipulate the date 1 year backward & 2 year forward. Kindly update me.
Regards,
Hemanth Kumar.
I had a Long term capital gain (on transfer of Residential house) during F.Yr 2008-09, However since i bought a new residential house during 2008-09 at a cost which is more than my Capital gain during 08-09 i need not pay any tax on CG. Now If i sell another residential house during F.yr 2009-10 & if that results in Long term capital gain, can i claim the difference amount (F.yr 08-09 Cost of new asset - Capital Gain exempt)as exemption u/s 54 during F.Yr 2009-10. (Since section stipulate the date 1 year backward & 2 year forward. Kindly update me.
Regards,
Hemanth Kumar.
22 June 2009
Will you please explain your query further? The second house which you are planning to sell in FY 2009-10 is which house? All together different house or the house you have bought by investing the capital gains during 2008-09.
Anyways if an assessee has claimed exemption from Capital Gains by investing in the property, he/she cannot sell it within 3 years of its acquisition. If does so, whole of the Capital Gains exempt earlier gets taxable in the year of sale.
Anyways if an assessee has claimed exemption from Capital Gains by investing in the property, he/she cannot sell it within 3 years of its acquisition. If does so, whole of the Capital Gains exempt earlier gets taxable in the year of sale.
22 June 2009
Hi Hemanth,
In my opinion you can certainly claim the deduction u/s. 54 on the difference on the purchase price minus capital gain of earlier property.
In my opinion you can certainly claim the deduction u/s. 54 on the difference on the purchase price minus capital gain of earlier property.
23 June 2009
Thanks for your views, again dear Vipul the house which i am planning to sell is altogether a new house which was purchased during 2003-04. can u please re update me after considering the above.
23 July 2025
Thanks for the clarification, Hemanth. Now that it is clear that:
The house sold in FY 2009-10 (House B) is completely different from the one purchased in FY 2008-09 (House C),
And the house purchased in FY 2008-09 (House C) was not sold within 3 years,
You're asking whether the excess investment in House C (i.e., amount over and above the capital gain of FY 2008-09) can be utilized to claim exemption under Section 54 for a fresh LTCG in FY 2009-10.
🧾 Section 54 — Quick Summary:
Section 54 allows exemption of LTCG arising from the sale of a residential house, if the capital gain is reinvested in another residential house:
Within 1 year before the date of transfer, or
Within 2 years after the date of transfer (in case of purchase), or
Within 3 years (in case of construction).
✅ Your Case:
New house (House C) was purchased in FY 2008-09.
You claimed Section 54 exemption for sale of House A in FY 2008-09 using part of that cost.
In FY 2009-10, you sell House B, and you wish to use the same House C (purchased in previous year) to claim another 54 exemption for the LTCG of House B.
❌ The Law Does NOT Allow Reuse of Same Investment:
Unfortunately, you cannot claim exemption twice under Section 54 using the same investment (i.e., House C).
📌 Why?
Section 54 requires that the capital gain be invested in a new house.
In your case, the investment (House C) has already been used to claim exemption for earlier LTCG.
The entire cost of the new house is deemed to have been utilized for the earlier exemption.
You cannot split one purchase cost across two capital gains from two different transactions in two different years.
🔁 Recap of What You Can’t Do:
You cannot claim exemption in FY 2009-10 from the sale of House B using House C (which was purchased earlier and already used for 54 exemption in FY 2008-09).
✅ What You Can Do:
To claim exemption in FY 2009-10:
You need to purchase or construct another residential property (House D) within the specified time limits of Section 54, in relation to the sale of House B.
📌 Summary:
Sale of Year LTCG Exemption u/s 54 Permissible?
House A FY 2008-09 Yes House C ✅ Yes
House B FY 2009-10 Yes Use balance cost of House C ❌ No (not allowed)
The house sold in FY 2009-10 (House B) is completely different from the one purchased in FY 2008-09 (House C),
And the house purchased in FY 2008-09 (House C) was not sold within 3 years,
You're asking whether the excess investment in House C (i.e., amount over and above the capital gain of FY 2008-09) can be utilized to claim exemption under Section 54 for a fresh LTCG in FY 2009-10.
🧾 Section 54 — Quick Summary:
Section 54 allows exemption of LTCG arising from the sale of a residential house, if the capital gain is reinvested in another residential house:
Within 1 year before the date of transfer, or
Within 2 years after the date of transfer (in case of purchase), or
Within 3 years (in case of construction).
✅ Your Case:
New house (House C) was purchased in FY 2008-09.
You claimed Section 54 exemption for sale of House A in FY 2008-09 using part of that cost.
In FY 2009-10, you sell House B, and you wish to use the same House C (purchased in previous year) to claim another 54 exemption for the LTCG of House B.
❌ The Law Does NOT Allow Reuse of Same Investment:
Unfortunately, you cannot claim exemption twice under Section 54 using the same investment (i.e., House C).
📌 Why?
Section 54 requires that the capital gain be invested in a new house.
In your case, the investment (House C) has already been used to claim exemption for earlier LTCG.
The entire cost of the new house is deemed to have been utilized for the earlier exemption.
You cannot split one purchase cost across two capital gains from two different transactions in two different years.
🔁 Recap of What You Can’t Do:
You cannot claim exemption in FY 2009-10 from the sale of House B using House C (which was purchased earlier and already used for 54 exemption in FY 2008-09).
✅ What You Can Do:
To claim exemption in FY 2009-10:
You need to purchase or construct another residential property (House D) within the specified time limits of Section 54, in relation to the sale of House B.
📌 Summary:
Sale of Year LTCG Exemption u/s 54 Permissible?
House A FY 2008-09 Yes House C ✅ Yes
House B FY 2009-10 Yes Use balance cost of House C ❌ No (not allowed)
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