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For claiming long term capital gains exemption under Section 54, you have to invest the plain the long term capital gains for purchase or construction of another residential house. You have to purchase the residential house within two years from the date of sale of the existing house. If you wish to construct a house by yourself or go for an under construction property, then the limit is three years from the date of transfer. If you have already bought a residential house within one year prior to the sale of the house, the exemption is still available. Please note if you are not able to utilize the amount of capital gain for purchase or construction of the house before the due date of furnishing of the return of income, then you have to deposit the unutilized portion of capital gains in an account under the Capital Gains Deposit Accounts Scheme. The amount so deposited has to be used for the purchase or construction with the prescribed time period.

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The tax exemption under Section 54, on long term capital gains on sale of a residential house, can be claimed to the extent of cost of the new residential house without any reference to the source of funding of the same. So what is important is the amount of investment in the house property. It is immaterial how you fund purchase of the property. Even loan taken for this purpose is also treated as your investment for this purpose. Since you are planning to buy a house costing more than the long term capital gains earned, you need not invest in the NHAI bonds. For claiming this benefit for an under construction property, you have to invest the amount of long term capital gains by the due date of filing of the ITR i.e 31st July 2026. In case you are not able to fully utilize the money, you need to deposit the unutilized long term capital gain in the Capital Gains Account which can be used for paying to the builder. You have to ensure that the construction of the house is completed within three years from the date of sale of your house.

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Answer to your question would depend on the period for which the property sold in April 2025 was held by you. In case it was held for more than twenty-four months, the profits are treated as long term capital gains and you can avail the exemption under Section 54 as you have already invested the capital gains on such property for buying another residential property within two months. Please note that for availing exemption under Section 54 there is no restriction on the number of residential house the tax payer can own on the date of sale of the residential house property. However, if the property was held for not more than twenty-four months, the profits made are treated as short term capital gains and no tax exemption is available in respect of short term capital gains even if the profits are reinvested for buying another residential house. Short term capital gains on sale of properties are treated like regular income and are taxed at the slab rate applicable to you.

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As per section 54 of the income tax act, which you are talking about, there are no restrictions as to the number of times a person can claim the exemption from payment of tax on long term capital gains arising on sale of a residential house by investing such long term capital gains in another residential house. Likewise, there is no restriction as to the number of residential houses you can own on the date of sale or investment. The exemption for long term capital gains arising from sale of a residential house can be claimed by investing the capital gains in one residential house in India. However, as an exception an individual or an HUF is allowed to claim exemption in respect of long term capital gains arising from sale of one residential house by investing the long term capital gains in two residential house provided the amount of long term capital gain does not exceed two crores rupees. This option to invest the long term capital gains from sale of one residential house in two residential house in available only once in the lifetime of the tax payer. Please note that the exemption of long term capital gains is available only if the residential house which you are planning to sell has been held by you for 24 months or more on the date of sale.

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As per the provisions of Section 54 of Income Tax Act an individual or an HUF can claim exemption from long term capital gains on sale of a residential house if the long term capital gains on such sale are invested for purchase or construction of one residential house in India within specified time period. There is no restriction as to the number of properties in respect of which or number of times the tax payer can avail this exemption. Moreover, there is no restriction as to the number of properties the tax payer can own to be eligible to avail this exemption. Though for claiming exemption for long term capital gains on sale of a residential house the capital gains have to be invested in one house only but the tax payer has once in lifetime option to invest capital gains from sale of one house in to two houses provided the amount of indexed capital gain does not exceed two crores. Strictly legally speaking your son is selling two residential flats having different numbers, he can invest the capital gains for purchasing two residential house properties. Please note the purchase of two flats have to be mapped individually against one flat for claiming capital gains exemption and the exemption is available on one to one basis and not on an overall basis.

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For the purpose of calculating capital gains on sale of any property, cost will always include the purchase consideration, brokerage, transfer fee paid, stamp duty & registration charges incurred at the time of purchase of the property being sold now. This will also include cost of any improvement to the property, if any, incurred by the owner of the property. Likewise, while calculating exemption available under Section 54, you will be entitled to take into account all the costs incurred in connection with purchase of the new property. This will include brokerage, stamp duty & registration charges, transfer fee etc.

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Since you have completed 2 years of holding of your present dispensary, any profit arising on sale of it will be treated as long term capital gains. For long term capital gains on sale of an asset other than a residential house, you can claim exemption under Section 54F only if you invest the sale consideration to buy a residential house. Since you are planning to buy a commercial property, you cannot claim any exemption from payment of long term capital gains. However, if you still want to save tax on the long term capital gains, you can save long term capital gains upto Rs. 50 lakhs by investing the capital gains in bonds of specified financial institutions under Section 54EC within six months from date of sale of the dispensary. However, if you undertake the buy and sell transactions in the same financial year, the same will get adjusted in your block of assets and you will not have to pay any tax on profits if any made on sale of old dispensary as long as your block of assets at the end of the year does not become negative. However, if both the transactions take place during different years, you may have to pay tax on profits so made.

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The exemption under section 54 in respect of long term capital gains are available to individual and HUFs in respect of all residential properties whether selfoccupied or let out. So if you are an individual letting out a residential property then yes the same rule applies. If you are selling a commercial property, then exemption for long term capital gains can be claimed under Sec 54F and not under Section 54 by investing in a residential property. The rules are broadly the same but in case of Sec 54F the net sale proceeds have to be invested whereas Sec 54 requires you to invest only the long term capital gains after applying indexation in a residential property in both the cases. Alternatively and additionally , you can invest the indexed capital gains in capital gains bonds of specified financial institutions under section 54EC to save tax in both the cases.

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The answer to your question would depend on various factors. First and foremost, factor to be considered would be the returns which you would be able to generate on the amount invested after paying the taxes. The other factor to be considered would be your fund requirement in next five years during which time your investments in these bonds would remain illiquid. Looking at the fact that the tax payable on long term capital gains without availing indexation benefits is only 12.50% it may be beneficial for you to pay tax and have the benefit of higher returns and higher liquidity. The capital gains bonds offer only 5% p.a.