October 3, 2025: Section 54 of the Income Tax Act offers individuals and Hindu Undivided Families (HUFs) relief from long-term capital gains tax on the sale of residential property, provided the gains are reinvested in another residential house within stipulated timelines. Moneycontrol’s Ask Wallet Wise feature, which provides expert guidance on personal finance, recently addressed a reader’s query on this exemption.
In the case presented, a house comprising a stilt plus four independent floors was constructed, of which two floors were sold separately to two buyers. The proceeds were placed in two distinct Capital Gains Accounts with the State Bank of India. The question raised was whether both sums could be combined to purchase a single residential property.
According to tax experts, since the capital gains stemmed from residential units and were correctly deposited in Capital Gains Accounts, they qualify as long-term in nature. Under Section 54, exemption is available if the gains are reinvested in purchasing another residential house in India within two years of the sale, or in constructing one within three years.
Notably, while there is a one-time option for reinvesting the gains from a single sale into two houses—subject to conditions such as the total capital gain not exceeding Rs 2 crore—this provision does not apply to multiple sales. In such cases, exemption is limited to the reinvestment of proceeds into a single property.
Therefore, the taxpayer in question may lawfully utilise the capital gains from the two floors, deposited in separate accounts, to purchase one residential house within the prescribed period.
Disclaimer: Expert opinions published by Moneycontrol are independent. Readers are advised to seek professional advice before making financial decisions.
