90 crore tax deduction approved! Delhi HC allows 54F income tax deduction for buying multiple floors! Here's what it means for you This ruling allows homeowners to claim long-term capital gains exemptions when investing sale proceeds into a new residential house, even if they own multiple floors in their existing single residence
Is owning multiple floors in the same residential building equivalent to owning more than one residential property? And if that is the case, will the concerned individual not be eligible to claim a long-term capital gains (LTCG) exemption from the sale of his/her capital assets under Section 54 of the Income Tax Act?#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} In a recent verdict, the Delhi High Court noted that ownership of multiple floors in the same building does not amount to owning more than one residential property, a prerequisite for claiming long-term capital gains exemption under Section 54F.
“We find it difficult to accept that, in the given facts, different floors of a house are required to be considered as multiple residential houses,” ruled the high court.
Read on to know the tax-related implications of this judgment and how this will impact homeowners across the country.
What does Section 54F say?
Under Section 54F of the I-T Act, an individual can claim a long-term capital gain exemption on the sale of any capital asset they own, like long-term investments in stocks, intellectual property, and more (but not a house), provided they invest the net sales amount received from this old asset to purchase a new residential house.a:hover{text-decoration:none;} .liveEventMain_widget{margin-top:15px;padding-top:24px;border-top:2px solid #000;position:relative;font-family:Montserrat;} .liveEvent_slider{position:relative;overflow:hidden;} .liveEvent_slider ul{white-space:nowrap;list-style:none;margin-top:12px;} .liveEvent_slider ul.sliderContainer{margin-bottom:30px;} .liveEvent_slider ul li{white-space:normal;width:282px;vertical-align:top;display:inline-block;margin-right:12px;border-radius:12px;box-shadow: 0px 4px 12px 0px #2407461F;background-color:#fff;overflow: hidden;} .images_wrap{position:relative;} .images_wrap .cover_img{object-fit:cover;object-position:center;border-top-left-radius:4px;border-top-right-radius:4px;} .images_wrap .author_img{position:absolute;left:10px;top:13px;border-radius:10px;} .images_wrap::before{background-image: linear-gradient(180deg, rgba(11, 11, 46, 0) 20.31%, rgba(11, 11, 46, .6) 61.46%, #0b0b2e);content: "";height: 100%;left: 0;position: absolute;right: 0;width: 100%;} .liveEventMain_widget .details{padding:12px;} .liveEventMain_widget .category{font-size:12px;line-height:14px;font-weight:700;color:#6a11b0;margin-bottom:8px;} .liveEventMain_widget .course_name{font-size:16px;line-height:20px;font-family:Faustina;-webkit-line-clamp:2;overflow:hidden;height:40px;display:-webkit-box;-webkit-box-orient:vertical;font-weight:600;color:#000;} .liveEventMain_widget .details .author_name{font-size:13px;line-height:16px;color:#333;font-weight:400;margin-top:4px;-webkit-line-clamp:2;overflow:hidden;height:32px;display:-webkit-box;-webkit-box-orient:vertical;} .liveEventMain_widget .view{border: 1.5px solid #D51131; display: block; padding: 8px 0; text-align: center; border-radius: 4px; font-size: 14px; line-height: 16px; color: #D51131; margin-top: 12px; width: 100%; font-family: Montserrat; font-weight: 600; cursor: pointer;} .liveEventMain_widget .view span{display: inline-block; width: 6px; height: 6px; border-top: 1.5px solid #ed193b; border-left: 1.5px solid #ed193b; transform: rotate(90deg); position: relative; left: 5px; top: -2px;} .liveEventMain_widget .view span::after{content: ''; display: inline-block; width: 11px; border-top: 1.5px solid #ed193b; transform: rotate(45deg); position: absolute; top: 3px; left: -2px;} .liveEventMain_widget .arrow_btn{width: 26px; height: 25px; position: absolute; z-index: 11; background-size: 312px; cursor: pointer;} .liveEventMain_widget .nextprev-btn{display:inline-block;width: 100%; position: absolute; top: 59%;} .liveEventMain_widget .prev-btn{background-position: -212px -2px;left: -12px;} .liveEventMain_widget .next-btn{background-position: -241px -2px; right: -3px;left:unset;} .liveEventMain_widget .arrow_btn.disable{opacity:0.5;} .liveEventMain_widget .ts-dots{display:inline-block;position:absolute;top:34px;right:10px;} .liveEventMain_widget .ts-dots ul{display:inline-block;} .liveEventMain_widget .ts-dots li{width:7px;height:7px;border-radius:50%;background-color:#cdcdcd;margin:0 2px;display:inline-block;} .liveEventMain_widget .ts-dots li span{display:none;} .liveEventMain_widget .ts-dots li.active{background-color:#ed193b;} .liveEventMain_widget .topContain { display: flex; align-items: center; gap: 6px; } .liveEventMain_widget .topContain .imgBox { max-width: 40px; } .liveEventMain_widget .topContain .logoTitle { font-family: "Montserrat", "Verdana"; font-weight: 700; font-size: 20px; line-height: 100%; } .liveEventMain_widget .topContain .logoSubTitle{ position: relative; font-size: 18px; font-weight: 500; line-height: 1.2; color: #747474; margin-left: 24px; } .liveEventMain_widget .topContain .logoSubTitle:before{ content:''; position: absolute; left: -13px; top: 0; width: 1px; height: 100%; background-color: #838383; } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer{ } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer .liveEventCard{ display: flex; } .liveEventMain_widget .liveEvent_slider .liveEventCardContainer .liveEventCoverImg{ }
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Moreover, this residential property should be purchased either 1 year before or 2 years after the sale of the asset. In case the residential property is to be constructed, the proceeds should be invested within 3 years from the sale of the old asset.
However, to claim this exemption, the concerned taxpayer should not own more than one residential house on the date of sale of the capital asset, other than the one bought for claiming exemption under Section 54F.
Says CA Ashish Niraj, Partner, ASN & Company, Chartered Accountants, “ This judgment from the Delhi High Court brings a much-required clarity regarding the concept of ‘one residential house’ for section 54F deduction. Law prescribes that one of the conditions to get an exemption under this section is that the taxpayer should not own more than one residential house, other than the new asset, on the date of transfer of the original asset. If we see the wording, it does not talk about a ‘residential unit’ but rather a ‘residential house.’ So when the address is the same, having different floors registered in the name of other family members does not take away its characteristic of “residential house.”
The case, as it happened
In 2011, Lata Goel, who was filing her ITR for AY2011-12, claimed a Rs 90 crore deduction under Section 54F, since she was investing the gains from her share sale proceeds into purchasing a residential property.However, in 2015, the AO (assessing officer) on this case restricted this 54F deduction to just Rs 30 crore, citing that the amount received from the sale of shares was not directly invested in acquiring the new asset. Overturning this decision, the Commissioner of Income Tax (Appeals) [CIT(A)] allowed the deduction, highlighting that no mandate required the amount received from the sale of a capital asset to be directly invested in acquiring the house property or the new asset.
In 2017, the AO reopened the case, citing that, as per SDMC (South Delhi Municipal Corporation) records, the assessee owned multiple properties (i.e., multiple floors at her property in Vasant Vihar, Delhi) and, hence, was ineligible for deduction. This decision was again overturned by ITAT, thereby allowing a full Rs 90 crore deduction, which was upheld by the Delhi High Court in 2025.
What constitutes one house property?
As per the Delhi HC’s verdict, multiple floors in the same building, even if they are co-owned with family members, do not amount to owning more than one residential house. Accordingly, “if, in case the floors or houses are so constructed as to be used as one singular unit or capable of being used as such, they may fall within the definition of a residential house and be eligible for tax exemption,” explains CA Mihir Tanna.What if the individual owns, or co-owns, a residential floor in each of 2 buildings that are separate? Will it still be considered as a single residential In that case, as Niraj highlights, “residential units in one building will only be treated as one residential house. So, if you have a house or floor in two different premises, then you will not be eligible for this exemption.”
Can 2 related individuals claim 54F deduction for the same floor/residential unit?
In cases where the residential unit or floor is co-owned or jointly owned, both or all the parties involved can claim exemption under Section 54F for the same unit. Niraj believes that this is possible in light of this judgment, but only in proportion to their share of investment in the new asset or residential property.Explains Tanna, “Say Mr. A sold shares worth Rs 50 lakh, while his wife, B, sold shares worth Rs 25 lakh. Now, both A and B can pool their proceeds to buy a residential property that is priced at Rs 75 lakh; they can each claim 100% LTCG exemption on their sale proceeds amount under Section 54F.”
CA Mayank Mohana concurs. “Yes, co-owners can claim exemption in proportion to their share in the property in respect of the same property, provided other specified conditions are fulfilled.”
Consider this example. Mr. Goel and his wife jointly purchased a residential property for Rs 60 lakh. Now, there are 2 cases:
Where both Mr and Mrs Goel contribute Rs 30 lakh each from the proceeds of the sale of shares
Mr. Goel contributes Rs 20 lakh, and Mrs. Goel contributes Rs 40 lakh from the proceeds of the sale of shares.
In both cases, we are assuming that both Mr. and Mrs. Goel are investing 100% of their proceeds from the sale of shares.
CA Jigar Suba explains, “In the first case, both Mr. and Mrs. Goel will be eligible for a Section 54F exemption of Rs 30 lakh each, i.e., up to 50% of the property’s value (Rs 30 lakh).”
“But in the second case, where Mr. Goel contributed Rs 20 lakh and Mrs. Goel put in Rs 40 lakh to buy the property, Mr. Goel can only claim an LTCG exemption of Rs 20 lakh under Section 54F, while Mrs. Goel will be eligible for a 54F exemption of up to the amount of her share, i.e., Rs 40 lakh.”
In case they do not invest the entirety of the proceeds from the sale of shares towards buying the house, the exemption allowed will be calculated proportionally, using a separate formula.
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This story originally appeared on: India Times - Author:Faqs of Insurances
