Doubts regarding exemption under section 54 if we go for construction of a residential house.

[Kiran Verma]

I just gone through Section 54 and 54F and relevant case laws,notificatiions, and Circulars and this nice article. But the following doubts needs clarification. At first in the case of construction of a residential house, the time limit is 3 years. The doubt is this te years include bying the plot/land and construction or else is it compulsory that the plot/land should be purchased before 2 years and construction be completed in the next year or can purchase and construction be effected in the third year and completion off cousre before the end of 3rd year! 2. Is there any restriction in apportionment of the capital gains to be invested in plot/land and towards construction of the house? 3. Is there any restriction of the proposed construction of the house to meet the requirement such as a minimum plinth area or minimum of bed rooms or first floor or duplex like? My doubt is can i invest 80% of my gains in land and just 20% in the house built over there? If the author could clarify these doubts I shall be grateful Regards RK/25-07-2009

AI Summary

Clarification on Section 54: No Restrictions on Allocating Capital Gains; Complete House Construction Within Three Years. A user raised doubts regarding the application of Section 54 for tax exemption when constructing a residential house. The user questioned whether the three-year time limit includes both purchasing land and construction, or if the land must be bought within two years with construction completed in the third year. Additionally, they inquired about restrictions on allocating capital gains between land purchase and house construction, and whether there are specific requirements for the house's design. The reply clarified that there are no such restrictions, and the entire construction must be completed within three years from the asset's sale date.