By investing the proceeds in a single residential home, the legislation permits the claimant to claim an exemption from long-term capital gains from the sale of several residential homes.
Exemption on Residential Property
When selling a residential property, individuals and Hindu Undivided Families (HUFs) may claim an exemption from long-term capital gains tax under Section 54 of the Income Tax Act, as long as the proceeds are reinvested in another residential property within a certain time frame. Decoding eligibility for this exemption based on the kind, quantity, and timeliness of the assets’ acquisition or construction is possible using the Ask Wallet Wise question.
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Combining LTCG for Exemption
They built a home with four separate levels and a stilt. Two people purchased two of these floors. SBI opened two separate capital gains accounts with the selling revenues from each level. Can I utilize the capital gains from both sales to buy one house?
Professional Guidance: It is clear that the two floors were residential units and that the capital gains are long-term in nature since you put them in capital gains accounts.
Individuals and Hindu Undivided Families (HUFs) are exempt from long-term capital gains from the sale of residential real estate under Section 54 of the Income Tax Act, as long as the assessee uses the proceeds to buy or build another residential real estate in India within the allotted time frames.
Timeframe and Investment Rules
The acquisition of the new home must occur within two years of the old property’s selling date. Purchasing the home within a year prior to the sale still qualifies for the exemption. If you buy a home that is still under construction or choose to build your own, you have an extra three years to finish it.
By investing long-term capital gains from the sale of one residential home into two residential homes, a taxpayer can claim an exemption under a special one-time option, as long as certain requirements are met (such as the option being exercised only once in a lifetime and the total capital gain not exceeding Rs. 2 crore). The exemption will not be given for both homes, nevertheless, if the long-term capital gains from the sale of one residential property are invested in two other homes without fulfilling these requirements. Only one residential home may be excluded in certain circumstances.
However, as long as the deadlines established in Section 54 are adhered to, the legislation permits claiming an exemption from long-term capital gains from the sale of several residential homes by investing the proceeds in a single residential home. You may thus use the funds in both Capital Gains Accounts to buy a single residential home property in India within the allotted time frame since you have accurately deposited the long-term capital gains from several residential units.
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