Turning capital gains into your dream home by leveraging the power of gifting

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Subscribe to enjoy similar stories. For those who wish to use profits from shares, mutual funds, land or commercial property to buy their dream home, the government allows tax exemption on such gains under Section 54F. However, there is one condition—the prospective buyer should not own more than one residential property at the time of selling the asset whose profits are to be reinvested.

So, what do you do if you already have two residential properties in your name but wish to buy a third one for your child or parents with the sale proceeds of another asset? Transferring one of the residential properties or non-residential assets to your family may help in some cases. Let’s take this hypothetical case: Ashish, who is married to Anita and has one adult daughter and senior citizen parents, owns two apartments in the same residential complex. He wants to sell the land he owns and some shares to buy another flat for his daughter.

What are his options to qualify for tax exemption under section 54F? Also read | Decoding dual taxation: What NRIs need to know for better tax efficiency On making this transfer, Ashish is left with one apartment in his name, which, as per the Income Tax Act, makes him eligible to claim exemption under 54F. However, professionals warn that such transactions are highly litigative. Sujit Bangar, founder, Taxbuddy.com, explained: “Since the original owner (Ashish) entirely paid to buy the residential property, they will still have beneficial ownership of that property.