Selling More Than One Flat? You Can Get Tax Exemption If LTCG From All Deals Are Reinvested In One Property: ITAT

Selling More Than One Flat? You Can Get Tax Exemption If LTCG From All Deals Are Reinvested In One Property: ITATApartments in Mumbai. (PUNITPARANJPE/AFP/GettyImages)

In a ruling that is bound to bring cheer to many taxpayers, the Income Tax Appellate Tribunal (ITAT) bench at Mumbai has passed a ruling stating that tax benefits can be availed of by the assessee if long-term capital gains (LTCGs) arising from the sale of more than one flat are re-invested in a single residential property in the country, reports Times of India.

If a residential property is held by a taxpayer for two years or more, the profits arising from its sale are LTCG, taxable at a rate of 20 per cent. Section 54 of the Income Tax Act allows for the taxable part of the LTCG to be decreased to the extent that a part of those profits is re-invested in a residence in India within the stipulated time limit.

The issue regarding section 54 has been that many times IT authorities deny the benefit under it on the ground that money from the sale of more than one property was re-invested in a new residence. The court has finally laid this ambiguity to rest, stating that the restriction within the provision is only if the new investment is made in multiple properties, and not that the money was obtained from the sale of multiple properties.

"The provision of Section 54 is applied to the transfer of any number of residential houses by the taxpayer provided the capital gains arising therefrom are invested in a proper manner within the prescribed time period,” the bench noted.