Selling Multiple Houses In 1 Year – Can You Claim Section 54 Exemption On All?

While Section 54 of the Income Tax Act provides a valuable tax-saving avenue on long-term capital gains from the sale of residential property, it comes with certain caveats. As per current provisions, the exemption is typically allowed on the capital gains arising from the sale of one residential property and reinvested into one or two residential properties in India within a stipulated time frame.

However, if multiple houses are sold within a financial year, exemption under Section 54 cannot be claimed for each of them unless the conditions are individually met. The law currently allows reinvestment benefits only once in a lifetime for two properties, and only if the capital gains are less than Rs 2 crore. For high-value or multiple transactions, this exemption cannot be availed repeatedly, says Ms Manju Yagnik, Vice Chairperson of Nahar Group and Senior Vice President of NAREDCO- Maharashtra.

"A smart approach for homeowners with more than one property to sell in a year is to strategically time their sales and reinvestments across different assessment years, wherever feasible. It's also important to keep clear records of reinvestment, be it under-construction projects, registered ready properties, or redevelopments, as documentation and intent play a huge role in the claims process," Ms Manju Yagnik added.

With real estate prices witnessing steady growth and investors increasingly opting for portfolio realignments, understanding such clauses becomes essential to avoid unintended tax outflows.

"Section 54 of the Income Tax Act has been instrumental in encouraging reinvestment into residential real estate, and the government has taken timely steps to streamline its provisions. Typically, when multiple residential properties are sold in a financial year, the exemption under Section 54 can be claimed against the capital gains from one of those sales, provided the amount is reinvested in one or two residential units within the stipulated time frame. While the exemption is not available on all sales individually, the law allows flexibility in structuring reinvestment, especially in scenarios involving joint ownership or staggered transactions. This continues to support end-user and investor confidence in the residential segment," commented Mr. Mohit Goel, Managing Director, Omaxe Ltd.

Selling more than one property in a single assessment year would put an Indian taxpayer, possibly one wanting to reduce their capital gains tax outgo by using the Section 54 exemption provided under the Income Tax Act, 1961, in a difficult spot. There is an exemption for long-term capital gains tax under Section 54 if the gains are reinvested in a new residential property within specified timelines at the time of sale of a residential property.

But selling more than one house in a year for an excess of the cost price means the application for exemption will be subject to interpretative clarity on income tax provisions, prevailing judicial precedents, and new income tax notifications.

Section 54 specifically grants exemption to individuals and Hindu Undivided Families (HUFs) in cases where, on transfer of a house property being a long-term capital asset, the net consideration is invested in another residential house within one year before or two years after the date on which the transfer took place.

Alternatively, within a period of three years commencing from the date of transfer, fees are prescribed in case such a new asset is constructed. Until now, the big question has been - what if someone sells two or three properties in a year, and he wants to be covered under this provision for all sales made by him in one FY? A plain reading of the section does not directly suggest that the exemption can be availed only for a specific number of times in a year. This means that theoretically each eligible sale where the assessee buys or constructs an eligible residential house could qualify for exemption on its own.

But the Income Tax Department and courts also refer to the objective behind it, and the functional aspects of transactions to stop misuse. If one assessee sells multiple properties, each sale resulting in long-term capital gains, the question arises whether the exemption can be claimed for each transaction on investing corresponding amounts or once an assessee claims the benefit in one year, he cannot do so for another property.

The law has seen major changes in recent years. For example, we can now claim Section 54 Exemption for buying two residential houses (from Assessment Year 2020-21) on the sale of house property if the capital gain is up to Rs 2 crore, but limited to once in a lifetime. This is meant to be a "one-time" option to balance flexibility against closing any loopholes.

Siddharth Maurya, Founder & Managing Director, Vibhavangal Anukulakara Private Limited says, "If an individual sells two or more houses in a year and the same gives rise to separate long-term capital gains, then technically exemption under Section 54 is available for each such house sold provided all other conditions are satisfied and reinvestment making timelines are adhered to as per each transaction surplus. But if someone reinvests the profit of multiple sales in more than two residential houses, then there will be a full exemption for only 2, and even further, this cap would now be a level concession. For all other cases, exemption has been given in recent court rulings on the proviso that if the entire capital gains arise from multiple sales of house properties and are invested only in ONE eligible residential property, either being purchased or constructed, and each sale satisfies certain conditions."

However, there is one exception: in case the sum of the capital gains exceeds Rs 2 crore, you can invest in two new homes and still receive exemption; also, the exemption can be availed only once during a lifetime. No other circumstances under which capital gains are used for buying multiple properties are allowed under the law.

Where proceeds from such a sale are not used in the manner specified, or if investment in the construction of the new house is not carried out as per the conditions stipulated, the exemption is withdrawn, and the unutilized gains are taxed as long-term capital gains. All investments are to be made in India itself, and in case you are not able to invest in purchasing or constructing a home forthwith, then you need to deposit the amount of capital gains in a Capital Gains Account Scheme by the due date for filing the return of income.

Section 54 is a good provision for home upgraders and reinvestors. It provides an opportunity for people who've built or inherited a portfolio of homes over a lifetime to reap wealth or support shifting family needs without taking a stiff tax hit, as long as every rule is adhered to meticulously.

In reality, while the law is clear on reinvestment into a single dwelling and there are practical, straightforward steps to follow, real estate complexities and changing tax systems make it another area where professional assistance should be sought. In the long run, the structure of Section 54 provides harmony between the taxpayer and the exchequer—liberal opportunity for honest ploughing back of the capital, with opportunities to misuse the provisions or derive double benefit," says Aman Gupta, Director, RPS Group.

To summarise, you can sell more than one residential house in a single year and yet avail of the Section 54 exemption, provided the capital gains on both your sales are reinvested into one new property in India within the specified time frames. The only exception to not shooting out the proceeds to invest in two properties is a one-time benefit, and there is a cap of Rs 2 crore for that. To protect your tax break, keep detailed records—and, ideally, speak with a tax pro to ensure you're meeting all conditions.

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