U/s 54 Re investment of capital gain in new residential house property

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This discussion clarifies the rules for reinvesting capital gains from selling a plot of land into a new residential property under Section 54F of the Income Tax Act. The key issue is that if you already own more than one residential house property when you sell the original asset (the plot), you are generally not eligible for the exemption. This is because Section 54F has specific conditions regarding the number of residential houses owned by the assessee.

Pankaj

Pankaj (Querist)

05 February 2022 Sir
I have 5 residential house property ( including this 1 plot + 4 Flat ) which was purchases by me in past. Out of 5 residential house property i am going to sale 1 property ( plot ) .
As per my calculation Rs 40 lakhs long term capital gain will be arise on such transaction.
So i have a question that , can i reinvest such capital gain in another new a residential house property even i have hold 4 house property ? Please explain rule regarding number of residential house property.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

05 February 2022 As you are selling a plot (& not residential house property), and also holding more than 1 house property (here another 4 residential houses), you are not eligible for sec. 54F of IT act. Or you cannot get exemption by reinvesting the LTCG in any residential house property.

Pankaj

Pankaj (Querist)

05 February 2022 Thanks sir
sir please explain me what is rule for holding of number of house property ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

05 February 2022 The condition is for sec. 54F for its applicability...... as under.......

"" Provided that nothing contained in this sub-section shall apply where—

(a) the assessee,—

(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or

(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or

(iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and

(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head "Income from house property"."

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