Can I claim capital gains exemption for consolidating multiple properties into a single residential property?

I am selling three residential house properties all during the financial year 2024-25. My aggregate indexed long-term capital gain from the sale of all three properties is ₹95 lakh. Can I claim a long-term capital gains exemption for all three properties by investing the capital gains in a single residential house property?

Section 54 provides for exemption from long-term capital gains from the sale of a residential house if you invest the indexed long-term capital gains in one residential house within the prescribed period. The same cannot be claimed in respect of more than one property if you invest the long-term capital gains in more than one residential house property except a once-in-a-lifetime opportunity to invest capital gains from the sale of one house property in two residential house properties if the long-term capital gain does not exceed two crores rupees in respect of the property sold.

Please note that there is no restriction in the tax laws for investing long-term capital gains arising from the sale of more than one residential house property in one residential house property for claiming exemption under Section 54. The same has been decided by the Mumbai Tribunal in a few cases. This exemption can be claimed even if two residential houses are sold in two different financial years as long as a new residential house is bought within the prescribed period. Please note that in the case of multiple sales and purchases of residential houses, the exemption cannot be claimed on an aggregate basis. The exemption will only be available to each set of sales and corresponding investment in the residential house and the combination which is beneficial to the assessee has to be allowed.

Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and on @jainbalwant on Twitter.

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Published: 11 Apr 2024, 12:59 PM IST