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HomeNewsBusinessPersonal FinanceCan capital gains from the sale of two house floors be combined to purchase a single residential property for claiming LTCG benefits u/s 54?

Can capital gains from the sale of two house floors be combined to purchase a single residential property for claiming LTCG benefits u/s 54?

The law allows claiming exemption on long-term capital gains from the sale of more than one residential house by investing the gains in a single residential house

October 01, 2025 / 08:06 IST
Section 54 of IT Act

Section 54 of the Income Tax Act allows individuals and Hindu Undivided Families (HUFs) to claim exemption from long-term capital gains tax on the sale of a residential property, provided the gains are reinvested in another residential house within specified time limits. Ask Wallet Wise query decodes eligibility for this exemption regarding the nature, number of the assets, and timelines for purchase or construction.

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A house was constructed with a stilt plus four independent floors. Two of these floors were sold to two individuals. The sale proceeds from both floors were deposited into two separate capital gains accounts with SBI. Can I purchase one house using the capital gains from both sales?

Expert Advice: Since you deposited the capital gains in capital gains accounts, it is evident that the two floors were residential units and the capital gains are long-term in nature.

Section 54 of the Income Tax Act provides an exemption to individuals and Hindu Undivided Families (HUFs) for long-term capital gains arising from the sale of residential house property, provided the assessee invests the capital gains in the purchase or construction of another residential house property in India within the prescribed time limits.

The new house must be purchased within two years from the date of sale of the original property. If the house is purchased within one year before the sale, the exemption is still available. In the case of purchasing an under-construction house or opting for self-construction, an extended period of three years is allowed for completion.

There is a special one-time option that allows a taxpayer to claim exemption by investing long-term capital gains from the sale of one residential house into two residential houses, provided certain conditions are met (such as the total capital gain not exceeding Rs. 2 crore and the option being exercised only once in a lifetime). However, if the long-term capital gains from the sale of one residential house are invested in two separate houses without meeting these conditions, exemption will not be granted on both houses. In such cases, the taxpayer can claim exemption on only one residential house.

However, the law does allow claiming exemption on long-term capital gains from the sale of more than one residential house by investing the gains in a single residential house, as long as the timelines prescribed under Section 54 are followed. Therefore, since you have correctly deposited the long-term capital gains from different residential units, you may utilize the amounts in both Capital Gains Accounts to purchase a single residential house property in India within the prescribed time period.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

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Balwant Jain
Balwant Jain is a Mumbai-based CA and CFP
first published: Oct 1, 2025 08:06 am

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