May I purchase two residential properties using the profits from the sale of a single residential property in order to jointly apply for the long-term capital gains exemption with my children? One home was bought just one month before the sale, and another will be bought with the entire sale profits two years after the first. If not, kindly advise me on how to proceed so that the benefits can be transferred to my son and daughter without having any financial consequences for me or my children in the event of my passing.
You must invest only the indexed capital gains from the sale of the existing home property and not the total sale consideration in order to qualify for the exemption for long-term capital gains resulting from the sale of a residential property. If you want to claim an exemption under Section 54, you must only invest in one house; if you invest in more than one, you must decide which house you want to claim the exemption for.
However, according to numerous judicial rulings, the advantage under Section 54 can be claimed even for investments made in more than one flat if more than one flat is utilised as a single unit, such as adjacent flats or duplexes in the same building. You can purchase the new house in joint names with your son or daughter and still qualify for the tax break under Section 54. It is necessary that you put the necessary long-term capital gains into the home. Even if your child doesn’t put any money into the property, they might be included to the agreement as a joint owner. You may invest up to Rs. 50 lakhs in capital gains bonds of designated financial institutions within six months of the date the house was sold if the whole capital gains cannot be used to purchase a home.
Please make a will that specifies your son and daughter’s portion of all of your assets, whether they are moveable or immovable, in order to ensure that the property transfers to them seamlessly after your death. Your son or daughter won’t be required to pay taxes when they inherit the properties, but they might when they sell them.