Section 54F of Income Tax Act, 1961

In the matter of MRS. MEERA JACOB Versus INCOME-TAX OFFICER [2009 -TMI - 34032 - KERALA HIGH COURT], high court observed that:

Section 54F does not provide for exemption on investment in renovation or modification of an existing house. On the other hand, construction of a house only qualifies for exemption on the investment. Even addition of a floor of a self-contained type to the existing house would have qualified for exemption. However, since the assessee has only made addition to the plinth area, which is in the form of modification of an existing house, she is not entitled to deduction claimed under section 54F of the Act.

 

Exemption for reinvestment in residential property requires construction or purchase, not mere renovation or plinth-area additions. Exemption for capital gains via investment in residential house property is confined to construction or purchase of a house; renovation or modification does not qualify. Addition of a self-contained floor constitutes qualifying construction, whereas mere increase in plinth area as a modification of an existing house does not satisfy the investment requirement for the exemption.