Section 54 of the Income Tax Act

Income-tax Act, 2025: s.82

Section 54 of the Income-tax Act, 1961 corresponds to section 82 (Profit on sale of property used for residence) of the Income-tax Act, 2025.

Read section 82 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 54 is Allied Motors (supra); CIT v. Podar Cement Pvt Ltd. (226 ITR 625), cited in 244 of the 1,745 judgments on BharatTax that turn on this section.

Leading authorities on Section 54

Allied Motors (supra); CIT v. Podar Cement Pvt Ltd.
226 ITR 625 · 1997 · Supreme Court
244
citing judgments

Amendments to tax laws that are explanatory, declaratory, curative, or clarificatory in nature are judicially construed as retrospective, especially if they are intended to remedy unintended consequences.

Sanjeev Lal v. CIT
365 ITR 389 · 2014 · Supreme Court
122
citing judgments

For claiming capital gains exemption under beneficial provisions like section 54, the 'date of transfer' can be the date of the agreement to sell, particularly when coupled with substantial advance consideration or an enforceable right, adopting a purposive and liberal interpretation to acknowledge the assessee's intent.

CIT v. Manjula J. Shah
355 ITR 474 · 2013 · High Court
113
citing judgments

For capital assets acquired by gift or will, the indexed cost of acquisition under Section 48 is computed with reference to the year the previous owner first held the asset. The period of holding for determining if an asset is long-term also includes the previous owner's holding period, as per Section 2(42A).

CIT v. D. Ananda Basappa
309 ITR 329 · 2009 · High Court
97
citing judgments

For exemption under Section 54, the expression 'a residential house' allows for investment in multiple residential units that form one functional unit, as 'a' does not imply a singular number. The amendment to Section 54, effective from April 1, 2015, is prospective.

CIT v. Gita Duggal
357 ITR 153 · 2013 · High Court
77
citing judgments

For capital gains exemption under sections 54 and 54F, the term "a residential house" does not restrict the exemption to a single residential unit and can include multiple contiguous or combined residential units treated as one house.

CIT v. Kamal Wahal
351 ITR 4 · 2013 · High Court
71
citing judgments

An assessee is eligible for capital gains exemption under Sections 54 and 54F even when the new residential house is purchased in the name of their spouse, provided the investment comes from the assessee's own funds. This allows for a purposive construction of these provisions.

CIT v. Rajesh Kumar Jalan
286 ITR 274 · 2006 · High Court
66
citing judgments

Section 139(4) of the Income-tax Act, which allows for filing a belated return, acts as a proviso to Section 139(1). Consequently, the time limit for depositing amounts or utilizing funds to claim exemptions, such as under Section 54, extends up to the due date for filing a return under Section 139(4).

CIT v. Gurnam Singh
327 ITR 278 · 2010 · High Court
66
citing judgments

For capital gains exemption under Section 54F, the new residential house is not required to be purchased exclusively in the assessee's own name; acquisition in joint names or in the name of a spouse qualifies for the exemption. This principle also applies to Section 54 due to their pari materia nature.

Suraj Lamp & Industries (P) Ltd. v. State of Haryana
340 ITR 1 · 2012 · Supreme Court
64
citing judgments

A transfer of immovable property by way of sale is legally valid only through a duly stamped and registered deed of conveyance. Unregistered instruments like agreements to sell, General Power of Attorney, or wills do not transfer title or create an interest in the property.

CIT v. K. Ramachandra Rao
56 Taxmann.com 163 · 2015 · High Court
62
citing judgments

The exemption under Section 54F (or Section 54) for long-term capital gains cannot be denied if the assessee invests the entire sale consideration in constructing a residential house within the prescribed three-year period, even if the amount was not deposited in the Capital Gains Account Scheme before the due date for filing the income tax return under Section 139(1). The purpose of the Capital Gains Account Scheme is to preserve the exemption when actual investment is pending, not to deny it if actual utilization occurs within the statutory timeframe.

Judgments on Section 54

Shri Ashokkumar Bhavarlal, Bangalore vs. The Income Tax Officer Ward-1(2)(2), Bangalore

In the result, the appeal of the assessee is allowed on the preliminary ground of limitation

ITA 1541/BANG/2018[2013-14]Status: DisposedITAT Bangalore02 Mar 2021AY 2013-14

Bench: Shri N. V. Vasudevan & Shri Chandra Poojariassessment Year : 2013-14 Shri. Ashok Kumar Bhavarlal, Vs. Income Tax Officer, Prop: Ashok Bankers, Ward – 1(2)(2), #238, Thimmaiah, Road, Bengaluru. Bengaluru – 560 005. Pan : Aaopb 3451 A Appellant Respondent Assessee By : Shri. Shivaprasad Reddy Revenue By : Shri. Pradeep Kumar, Cit(Dr)(Itat), Bengaluru Date Of Hearing : 25.02.2021 Date Of Pronouncement : 03.03.2021 O R D E R Per N. V. Vasudevan: This Is An Appeal Filed By The Assessee Against The Order Of Pr. Cit, Bengaluru-1, Bengaluru, Passed Under Section 263 Of The Income Tax Act, 1961 (The ‘Act’), Relating To Assessment Year 2013-14. 2. The Assessee Is An Individual. In An Order Of Assessment Concluded Under Section 143(3) Of The Act For Assessment Year 2013-14 Dated 29.09.2015 In The Case Of The Assessee, A Sum Of Rs.4,23,825/- Was Added To The Income Declared In The Return Of Income Under The Heard “Capital Gains”. The Cit In Exercise Of His Powers U/S.263 Of The Act Was Of The View That The Aforesaid Order Of The Ao Allowing Deduction To The Assessee Under Section 54/54F Of The Act While Computing Capital Gain Was Erroneous & Page 2 Of 5

For Appellant: Shri. Shivaprasad ReddyFor Respondent: Shri. Pradeep Kumar, CIT(DR)(ITAT), Bengaluru
Section 143(3)Section 263Section 54