Source: Clear Tax ( https://bit.ly/426qy9j )

Income Tax allows exemption on the long term capital gain if you invest the gains/consideration in a new residential property subject to certain conditions. Recently, the Income Tax Appellate Tribunal (ITAT) Delhi has allowed multiple-year exemption u/s 54F for an under-construction house. It held that taxpayer can invest capital gains for the second or third time also towards the same new house property.

Let’s say Mr. X has sold his land to Mr. Sharma on 14-08-2024 for Rs.5 crores. He purchased the land in June 2020 for Rs.50 lakhs. He reinvested Rs.3 crores for purchase of a new residential property on August, 2025. He does not own any residential property on the date of transfer.

In this case, Long Term Capital Gains provisions are attracted as he held the property for more than 2 years. Therefore, indexation benefit is allowed in this case. He can claim exemption u/s 54F as in this case,

  • He sold a Long Term Capital Asset other than house property, and used the sales proceeds in a house property.
  • He does not own any residential property on the date of transfer.
  • Using the sales proceeds, he purchased of another residential property. Also, he made the purchase within 2 years of transfer.

If the exemption ceiling limit Rs.10 crores, the entire amount can be claimed as an exemption in this case.