Understanding exemption claims: Sections 54F and 54 explained for investors | Mint

I sold some shares during the current year on which I earned some Long Term Capital Gains (LTCG) and immediately invested the sale proceeds to buy a residential flat, say flat A, to claim exemption u/s 54 F in June 2024. I sold another of my flats before 23rd July 2024 (Not flat A) and wished to claim an exemption under section 54 by investing the indexed LTCG to buy another residential flat, say flat B. Can I claim deductions under both these sections during the same Financial year? I do not own any other flat.

An individual and a HUF can claim the exemption in respect of long-term capital gains arising from the transfer/sale of any capital asset other than a residential house under section 54F if a residential house is purchased within two years from the date of sale of the long term capital assets provided the taxpayer does not own more than one house on the date of sale of the long term capital asset. You have satisfied both the conditions, and thus, prime facie can claim an exemption under Section 54F.

Likewise, one can claim an exemption under Section 54 regarding long-term capital gains on the sale of a residential house, provided the capital gains are invested for buying another residential house within the prescribed period. There is no express ban on one claiming exemption under Sections 54 and 54F in the same financial year. Still, section 54F provides that exemption under Section 54 F is not available if the taxpayer buys a residential house other than the one in respect of which he is claiming exemption under section 54F, within a period of one year from the date of sale of the asset in respect of which the exemption under section 54 F is sought to be claimed.

Since you are buying flat B within one year from the date of sale of the shares, you are not eligible to claim an exemption under section 54 F regarding investments made in flat A. If the sequence of purchasing the house had been different, and you had bought the residential flat B to claim the exemption under section 54 before selling the shares, you would have been able to claim an exemption under both sections even if both the transactions took place in the same financial year.

Claim Exemptions for Flat A and Flat B Using Sections 54 and 54F

Since the law allows you to claim the exemption in respect of long-term capital gains even if you have purchased a residential house within one year before the date of sale of long-term assets, you can claim an exemption under Section 54 against the purchase of flat A as the same has been bought within one year before the sale of the residential house and claim exemption under Section 54 F against flat B which is also being purchased within the prescribed period. This way, you could circumvent the restriction of buying an additional residential house within one year from the date of the sale of shares.

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Balwant Jain is a tax and investments expert and can be reached at jainbalwant@gmail.com and @jainbalwant on his X handle.

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