Gains from House Property Sale to be Reinvested in One House only

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  1. ANUJ SINGHAL

    ANUJ SINGHAL New Member

    Existing Provision
    Section 54: The existing provision of sub section (1) of section 54 provides that where capital gains arises from the sale of residential house property, held for more than three years, is reinvested in purchasing or constructing “a residential house” within a specified period than the capital gains is exempt to the extent of reinvestment.

    Section 54F: The existing provision of sub section (1) of section 54F provides that where capital gains arises from the sale of any long term capital assets other than residential house property, held for more than three years, is reinvested in purchasing or constructing “a residential house” within a specified period than the capital gains is exempt to the extent of reinvestment.

    The exemptions in the above sections were available irrespective of the number of new houses bought, if converted into one and also the location of the house did not matter i.e. the house could be situated outside India.

    Proposed Amendments
    Both Section 54 and Section 54F are proposed to be amended by replacing words “constructed, a residential house“, with the words “constructed, one residential house in India“. Now the reinvestment is to be made in purchase or construction of one house in a specified time period and also the new house is to be situated in India.

    The amendment was thought of because there was ambiguity on whether the word “a residential house” only meant a single new house or could include more than one new house. On many occasions various courts referred section 13 of the General Clauses Act which states that whenever the singular is used for a word, it is permissible to include the plural, have given verdicts in the favour of assessee that reinvestment in “a residential house” does not necessarily means a single house.

    Date of Applicability:
    Amended Section 54 and Section 54F will be applicable from 1st April, 2015 and will accordingly apply in relation to assessment year 2015-16 (i.e. from financial year 2014-15) and subsequent assessment years.
     
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