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Interim Budget 2019: You can invest capital gains in two houses to save tax

FM Piyush Goyal proposed changes to Sec 54 of Income Tax Act with a caveat capping capital gains to Rs 2 crore; until now, a taxpayer was given relief only on one house

Tinesh Bhasin 

As a proportion of the annual target of Rs 11.5 trillion, the actual collection is 64.7 per cent of direct tax
Representative Image (Photo courtesy: Wikipedia)

If a father sells a big house to buy two smaller ones for his children, until now, he could claim on only one of the two properties. Under of the Income-Tax Act, (LTCG) benefit could be availed only on one located in India.

The Budget has now allowed sellers to get the benefit when they invest the proceed from the sale of one house into two residences. The only caveat is that the total capital gains have to be up to Rs 2 crore. Also, the benefit can be claimed only once. The changes in the benefit families who want to sell one big property and buy two separate houses to settle children or during the partition of the family assets. It also helps individuals who live in metros such as Mumbai and Delhi where properties prices are much higher compared to the rest of the country.

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The other conditions to get the remains the same. The house needs to be held for over two years (long-term). The seller needs to purchase a residential house either one year before the date of sale/transfer or two years after the date of sale/transfer. In case the seller is constructing a house, the seller has an extended time, that is, he will have to construct the residential house within three years from the date of sale/transfer.

There is, however, no clarity on whether an individual can sell multiple houses and invest the gains in one property to get the under While a few tax officers object to this, many (ITAT) have allowed the taxpayer to avail the benefit in such cases as is a beneficial provision. ITATs usually allow taxpayers to take the benefit in case of the grey areas if he has fulfilled all other conditions mandated by the law. “The view of ITATs is that the assessing officer cannot put additional conditions,” says Naveen Wadhwa, a chartered accountant with Taxmann.com.

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Wadhwa also points out that the benefit will not be available under Under this section, a taxpayer can sell any long-term asset and invest in a house to save tax. Long-term capital assets include a plot of land, mutual funds, stocks, gold, and so on.

First Published: Fri, February 01 2019. 16:20 IST