Section 54 Queries

Tax queries 270 views 3 replies

Tarun

3 Points Posted on 11 October 2021

Hello,

With effect from Assessment Year 2021-22, the Finance Act, 2020 has amended Section 54 to extend the benefit of exemption in respect of investment made in two residential house properties. The exemption for investment made, by way of purchase or construction, in two residential house properties shall be available if the amount of long term capital gains does not exceed Rs. 2 crores. If assessee exercises this option, he shall not be entitled to exercise this option again for the same or any other assessment year.

My query is, an assese sold one property in 2021 with capital gain of 50 lac and reinvested the proceed in another 1 residential property. He sold another property in 2021 with captial gain of 2 cr and reinvested the entire proceed in another 1 residential property only. Is exemption applicable under section 54 for both properties?

Replies (3)

Kev Men

790 Points Posted on 11 October 2021

In the above case section 54 exemption will be applicable on both the properties sold. This is because there are 2 properties sold and each properties' gain is to be allocated towards 1 property purchased each out of the 2 new properties.

The limit regarding 2 properties purchased is when the gains of 1 property sold is used against 2 properties purchased. This is not in the above mentioned case as 2 properties are sold and 2 properties are purchased and the gains of each property are set off against purchase of only 1 property out of 2 properties purchased.

In short, exemption u/s 54 can be claimed for both properties in my humble opinion.

Tarun

3 Points Posted on 11 October 2021

Thanks for your response Kev. I am unable to see your profile. Could you please help to confirm if you are a CA or another visitor on this website like me. Thanks in advance..