Section 54 F Clarification

Query:
Section 54 F of the Income Tax Act states that as on date of transaction the person shall have only one residence. So a person selling long term asset  owning  one house can buy one more house under section 54F is my understanding of the section. But some interpretation is  that one house includes the new house.
I kindly request for partners advice on the same.

Ans : The assessee does not own more than one residential house other than new asset on the date of transfer.

In the interim budget 2019, the finance minister has proposed to amend Section 54, for LTCG exemption arising from the sale of a residential house. The proposal provides that a tax payer will be entitled to invest the indexed capital gains in two separate residential houses, to claim the exemption available under Section 54. This option is available to the tax payer only once in his lifetime, provided the indexed capital gains do not exceed Rs two crores. It may be noted that the option to make investment in two residential houses has been extended under Section 54, for claiming LTCG exemption on sale of residential house only and not to LTCG for other assets under section 54F.

This amendment, along with the proposal to allow a tax payer to have two self-occupied house properties, will incentivise people to diversify their investment portfolio, with increased allocation to real estate. This will, in turn, spur demand for residential houses across the country, including tier-2 and tier-3 cities. Since this is a one-time opportunity, the benefit in other cases will be available for making investment in one residential house only, for claiming LTCG exemption under Section 54 and 54F.

Courtesy : CA. Thomas Kenny, CA. Thomas K George and CA. Shimon Xavier