Can I transfer my two flats to my children to claim LTCG tax exemption on buying a third property?

If you already own two houses, you would not be allowed to claim tax exemption on long-term capital gains from selling shares by investing the sale proceeds in a third house. However, you may plan for the tax exemption by transferring one of the houses to your children before selling the shares. Today's Q&A explains this in more detail in response to a reader's query.

Answer: Section 54F grants exemption to an individual and an HUF from long-term capital gains arising from the sale of a capital asset other than a residential house if the taxpayer uses the sale proceeds for acquiring a residential house property within the prescribed time period.

Long-term capital gains arising on the sale of shares also qualify for exemption under section 54F.

The exemption under section 54F is available only if the taxpayer does not own more than one residential house on the date of sale of the capital assets, except the house with respect to which the exemption is being claimed.

So whatever you have read online is correct, as you cannot claim exemption under section 54F for long-term capital gains arising on the sale of shares, as you already own two residential houses as of today.

Please note that you do not need to transfer both flats.

Since you can claim the exemption under section 54F if you already own one house, you will have to transfer only one flat in the name of your child before you actually sell your shares to be able to claim the exemption on long-term capital gains.