Selling an inherited house? Can you buy 2 flats and still claim LTCG tax exemption?

Selling an inherited house can lead to a substantial long-term capital gains (LTCG) tax liability, making tax-saving options an important consideration. While the Income Tax Act allows an exemption if the gains are reinvested in residential property, there are conditions on when the benefit can be claimed for two houses.

Today's Q&A explains such details in response to a query by a reader.

However, the law also provides for a once-in-a-lifetime opportunity to claim this exemption by investing the long termlong-term,long-term capital gains in two residential houses provided the amount of long term capital gains does not exceed two crore rupees.

Since the amount of long-term capital gains arising on sale of your ancestral house will exceed the threshold limit of two crore rupees for being eligible for availing this once-in-a-lifetime exemption. The section does not provide that this exemption is available only if the amount of long-term capital gains proposed to be claimed under this section does not exceed the threshold limit of two crores, but provides that this exemption will not be available if the amount of long term, long-term long-term capital gain arising on sale of the residential house exceeds two crores.

So though the exemption sought to be claimed does not exceed two crore rupees due to you opting to avail exemption under another provision of the law, in my opinion, you can not avail the benefit of exemption by investing the long-term capital gains in two residential houses.