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Sep 08, 2025
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She sold her house for Rs 2.7 crore to buy seven new flats and paid no income tax, wins case in ITAT Delhi; Know how
Section 54 of the Income Tax Act, 1961 allows a taxpayer who has sold a residential house property to avoid paying income tax if they purchase another residential property within a certain timeframe. Using the benefit of this section, in the financial year 2015-16, Saroj sold her house in Punjabi Bagh, a locality in West Delhi, for Rs 2.7 crore, and used Rs 2.55 crore to purchase seven residential house units in Greater Noida. After that she showed her income as Rs 5 lakh in her Income Tax Return (ITR) and Rs 2.2 crore as tax exemption amount under Section 54.
Essentially Saroj took advantage of this tax rule (Section 54) and claimed a long term capital gains (LTCG) tax exemption of Rs 2.2 crore crore and thus she had to pay no income tax. However, she soon got into trouble with the income tax department.
The income tax officer said that the language used in the Section 54 law back then was that a person can get tax exemption for selling house property if he/she buys "a residential property" using the capital gains. The income tax officer said the phrase "a residential property" can't mean that she can claim tax exemption for the seven house units purchased by her by using the capital gains from the Punjabi Bagh property sale.
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