I sold some stocks during the current year with which I made some profit. Long-Term Capital Gains (LTCG) and I immediately invested the sale proceeds to purchase a residential apartment, say apartment A, to claim exemption under section 54F in June 2024. I sold another one of my apartments before 23 July 2024 (not apartment A) and wanted to claim exemption under section 54 by investing the index-linked LTCG to purchase another residential apartment, say apartment B. Can I claim deductions under both sections during the same tax year? I don’t own any other apartment.
An individual and a Hungarian Forint You can claim exemption in respect of long-term capital gains arising from the transfer or 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 asset, provided that the taxpayer does not own more than one house on the date of sale of the long-term capital asset. You have fulfilled both the conditions and therefore, prima facie, you can claim exemption under section 54F.
Similarly, an exemption under section 54 can be claimed in relation to long-term capital gains on the sale of a residential house, provided that the capital gains are invested to purchase another residential house within the prescribed period. There is no express prohibition on claiming exemption under sections 54 and 54F in the same financial year. However, section 54F provides that exemption under section 54F is not available if the taxpayer purchases a residential house other than the one for which exemption under section 54F is claimed, within a period of one year from the date of sale of the asset for which exemption under section 54F is claimed.
Since you are purchasing flat B within one year from the date of sale of the shares, you are not eligible to claim exemption under section 54F in respect of the investments made in flat A. If the sequence of purchase of the house had been different and you had purchased residential flat B to claim exemption under section 54 before selling the shares, you would have been able to claim exemption under both sections even if both the transactions took place in the same financial year.
Claiming exemptions for floors A and B using sections 54 and 54F
Since the law allows you to claim exemption in respect of long-term capital gains even if you have purchased a residential house within one year from the date of sale of long-term assets, you can claim exemption under Section 54 for the purchase of flat A as the same was purchased within one year from the date of sale of residential house and claim exemption under Section 54F for flat B which is also purchased within the prescribed period. In this way, you would be able to circumvent the restriction of purchasing an additional residential house within one year from the date of sale of shares.
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Balwant Jain is a tax and investment expert and can be contacted at [email protected] and @jainbalwant on his X account.
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