As a home buyer you can claim exemption on long-term capital gains tax, in case you have invested in multiple houses. However, certain conditions also apply.
As per Indian taxation laws, a home owner is entitled to claim exemption on long-term capital gains tax, in case a person purchases a residential house. Although, there are a few conditions that apply to take benefits on this exemption. Some of these conditions are explained below.
Let’s take a look at the condition related to number of residential units in which the investments can be made.
Under Section 54 or 54F of capital gains exemption, one needs to understand whether a home owner can invest in more than one residential house and claim the exemption. As per a case of Gita Duggal (in 257 CTR 208), the Delhi High Court held that the expression ‘a residential house’ should be understood in a sense that building should be a residential one and that the word ‘a’ should not be understood to indicate a singular number. The court interpreted the word ‘a residential house’ to mean any residential house, in contradistinction to any ‘commercial house property’.
Further, tax payers were able to claim for exemption from capital gains tax by investing in more than one residential property. Later, with an amendment in income tax laws, the phrase ‘a residential house’ has been replaced with ‘one residential house’, with effect from April 1, 2015.
However, despite the amendment, one may still want to understand if it is being possible to claim long-term capital gains tax exemption in case a person has bought more than one residential unit. Let’s look at the following decision taken by the Supreme Court in India.
In the first instance, CIT vs D Ananda Basappa 309 ITR 329 (Kar.), multiple flats were bought by the home owner in the same complex, which were used as one unit. In such a case, tax exemption was being allowed. The income tax department filed a special leave petition against this decision, which was rejected by the Supreme Court.
Thus, it could be stated that even after the amendment of Section 54 and 54F, one may still claim exemption from long-term capital gains tax, in case the investment is made in one residential house property or invested in more than one residential property but use them as a single residential unit by the family.