Section 54 exemption
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
21 August 2013
suppose 1 person have sold residential plots & started investing such capital gains in construction of residential house. construction of such residential house is started & during the course if such person sold another residential plots within limits of 3 years than can he utilize capital gains in the same construction of residential house?
ie 1st he sold some residential plots & started construction of his residential house and again he sold 1 or 2 residential plots & such capital gain is utilized for the same under constructed ( construction of such residential house started), than can he get exemption u/s 54 for both sale of residential plots if he invest such amount in construction of residential house? please suggest me soon so as i can guide accordingly.
ie 1st he sold some residential plots & started construction of his residential house and again he sold 1 or 2 residential plots & such capital gain is utilized for the same under constructed ( construction of such residential house started), than can he get exemption u/s 54 for both sale of residential plots if he invest such amount in construction of residential house? please suggest me soon so as i can guide accordingly.
21 August 2013
Owning of a residential Plot does not give you residential house. So to become the owner of a Residential house you can sale any number of residential plots. The capital gains on all plots adding together shall be eligible for deduction u/s 54 and any amount not utilised shall be taxed finally as Capital Gains.
Suppose you have sold 3 residential plot
A for 5 lacs and capital gain is 2 lac
B for 15 lacs and capital gain is 8 lacs
C for 20 lacs and capital gain is 15 lacs
So your total Capital gain is 25 lacs then you have to utilise the entire capital gains in your residential house to get the exemption from Capital Gains within the specified time and the amount must be deposited in capital gain account otherwise it will not be allowed.
Suppose you have sold 3 residential plot
A for 5 lacs and capital gain is 2 lac
B for 15 lacs and capital gain is 8 lacs
C for 20 lacs and capital gain is 15 lacs
So your total Capital gain is 25 lacs then you have to utilise the entire capital gains in your residential house to get the exemption from Capital Gains within the specified time and the amount must be deposited in capital gain account otherwise it will not be allowed.
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Querist : Anonymous
Querist :
Anonymous
(Querist)
21 August 2013
as in your example, if residential plot "c" is sold after construction has been started for residential house with in 1 year , than would that capital gain be utilized for such construction of residential house?
23 July 2025
This is a good and practical question—let’s break it down:
Your Query (Simplified):
You are asking if a person starts constructing a residential house after selling some residential plots, and during the construction, sells another plot (say, within 1 year before the construction or during construction), can he utilize the capital gain from that later sale in the same house construction and claim exemption u/s 54?
✅ Yes, Exemption Can Be Claimed Under Section 54F (not 54)
However, there is a technical clarification needed first:
📌 Section 54 applies only to capital gains arising from the sale of a residential house property.
📌 For capital gains from sale of a plot of land (i.e., not a house), the correct section is Section 54F, not Section 54.
🧾 What Section 54F Says:
Section 54F allows exemption of entire LTCG (or proportionate) if:
The asset sold is not a residential house (i.e., land, plot, commercial property, etc.), AND
The net sale consideration is invested in:
Purchase of 1 residential house within 1 year before or 2 years after the date of transfer, OR
Construction within 3 years after the transfer.
💡 The exemption is allowed only if the person does not own more than one residential house (other than the new one) on the date of transfer.
✅ So in Your Scenario:
You start constructing a residential house after selling one plot (say, Plot A).
During construction (within 3 years), you sell another plot (Plot B).
You then utilize the capital gain from Plot B into the same ongoing construction.
➡️ You CAN claim Section 54F exemption for both plots, provided:
The investment in the same house construction is within 3 years of each plot’s sale,
The amount is invested or deposited in Capital Gains Account Scheme before due date of ITR, if not immediately used.
📌 Important Conditions for Claiming 54F for Multiple Sales:
Each sale must be long-term capital gain.
For each sale, the construction must complete within 3 years from that respective date of sale.
You can invest in the same house for each sale.
You must not purchase or construct another house during the exemption period.
Caution:
If the amount is not utilized before the due date of filing return, you must deposit the balance in a Capital Gains Account Scheme to retain exemption.
You must ensure that you don’t own more than one house (apart from the one being constructed), else Section 54F exemption is disallowed.
✅ Final Answer:
Yes, capital gains from multiple plot sales can be invested in the same under-construction residential house, and you can claim exemption under Section 54F for each, provided the conditions above are fulfilled.
Your Query (Simplified):
You are asking if a person starts constructing a residential house after selling some residential plots, and during the construction, sells another plot (say, within 1 year before the construction or during construction), can he utilize the capital gain from that later sale in the same house construction and claim exemption u/s 54?
✅ Yes, Exemption Can Be Claimed Under Section 54F (not 54)
However, there is a technical clarification needed first:
📌 Section 54 applies only to capital gains arising from the sale of a residential house property.
📌 For capital gains from sale of a plot of land (i.e., not a house), the correct section is Section 54F, not Section 54.
🧾 What Section 54F Says:
Section 54F allows exemption of entire LTCG (or proportionate) if:
The asset sold is not a residential house (i.e., land, plot, commercial property, etc.), AND
The net sale consideration is invested in:
Purchase of 1 residential house within 1 year before or 2 years after the date of transfer, OR
Construction within 3 years after the transfer.
💡 The exemption is allowed only if the person does not own more than one residential house (other than the new one) on the date of transfer.
✅ So in Your Scenario:
You start constructing a residential house after selling one plot (say, Plot A).
During construction (within 3 years), you sell another plot (Plot B).
You then utilize the capital gain from Plot B into the same ongoing construction.
➡️ You CAN claim Section 54F exemption for both plots, provided:
The investment in the same house construction is within 3 years of each plot’s sale,
The amount is invested or deposited in Capital Gains Account Scheme before due date of ITR, if not immediately used.
📌 Important Conditions for Claiming 54F for Multiple Sales:
Each sale must be long-term capital gain.
For each sale, the construction must complete within 3 years from that respective date of sale.
You can invest in the same house for each sale.
You must not purchase or construct another house during the exemption period.
Caution:
If the amount is not utilized before the due date of filing return, you must deposit the balance in a Capital Gains Account Scheme to retain exemption.
You must ensure that you don’t own more than one house (apart from the one being constructed), else Section 54F exemption is disallowed.
✅ Final Answer:
Yes, capital gains from multiple plot sales can be invested in the same under-construction residential house, and you can claim exemption under Section 54F for each, provided the conditions above are fulfilled.
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