Even a small house built on a large plot qualifies sec 54

Understanding Section 54/54F Exemptions: Saving Tax on Capital Gains with

Residential Property Investments

By CA Bhavesh Panpaliya

Q1. What are Section 54 and Section 54F exemptions under the Income Tax Act?

Answer:

These sections are powerful tools for saving long-term capital gains (LTCG) tax by

investing in residential property.

• Section 54: Applicable when you sell a residential house and reinvest in another

residential house.

• Section 54F: Applicable when you sell any other long-term capital asset (like

land, shares, etc.) and reinvest the entire net consideration in a residential house.

Key Insight: You must invest within 1 year before or 2 years after the sale (or

complete construction within 3 years).

Q2. Does the size of the house vs. land matter for exemption?

Answer:

Not at all. Even a small house built on a large plot qualifies.

Delhi ITAT in Girish Mohan v. ACIT (2023) confirmed that the exemption extends to the

entire cost — land + house, regardless of scale.

Example: If you build a 1BHK on a 1-acre plot, the whole cost (land + construction) is

eligible.

Q3. Can I claim exemption on vacant land attached to the house?

Answer:

Yes! As long as the land is "appurtenant" to the residential house (i.e., part of the same

property), it qualifies — even without construction

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What is a Hindu Undivided Family (HUF)? A Hindu Undivided Family (HUF) is a separate legal entity recognized under Indian tax law, allowing families following Hindu, Jain, Sikh, and Buddhist laws to collectively own property and manage income. It serves as a tool for family wealth management and potential tax optimization. What is the difference between a member and a coparcener in an HUF? A member of an HUF is any individual part of the family through lineal descent, marriage (for wives of male coparceners), or adoption. Members have the right to maintenance from the HUF property but generally cannot demand partition. A coparcener, on the other hand, is a member with a birthright in the joint family property. Under the Hindu Succession (Amendment) Act, 2005, both sons and daughters are coparceners by birth, with rights including demanding partition, joint ownership, limited alienation rights, and the right to question the Karta's actions. How is an HUF formed? Forming ...

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