Capital gain on sale of non agricultural land

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shamkant (Querist)
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17 October 2011 I sold the non agricultural land purchased before 15 years what will tax liability & what are the ways to save tax.
In case wholly taxable then what will be the Income Tax rate. Pls guide

CA Dileep Surya Kumar

CA Dileep Surya Kumar (Expert)
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17 October 2011 The profit amount in case transfer of non agriculture land,long term capital gain(sale price-indexed cost of acquisition) will be taxable @20% U/S 112 of Income tax act.

you can save by either 2 ways.
* Section 54 EC(investment in bonds)
* Section 54 F(investment in New residential house)

1. Long Term Capital Asset Long term assets means any capital asset held by assessee for more than 3 Years.

2. If assessee has sold the Long term capital asset during the previous year and made a long term capital gain then he can invest money of capital gain in Capital gain bonds and can save tax on long term capital gain.

3. Amount to be invested in bonds is only capital gain not net consideration received on sale of long term capital asset

4. Amount exempted under this section will be amount of capital gain or amount invested in capital gain bond which ever is lower maximum up to 50Lakh(One more good news for you that 50 lakh Limit is for each financial year .As your six month limit is fall in two different Financial years so you can save 50 lakh in fy 2008-09 and 50 lakh in 2009-10.so one can save upto maximum of one crore of capital gain u/s 54EC.
)

5. These Bonds Maturity Period is Three years

6. Capital gain bonds eligible under this section are now can be issued only by REC or NABARD

7. Bonds can not be pledged ,sold transfer before completion of three year from purchase of bonds ,and in case its transferred then amount capital gain exempted on investment in these bonds will be made taxable in that previous year as Long term capital gain .

8. Amount of capital gain should be invested in Capital gain bond within 6 Month from date of transfer/sale of capital asset .

Further, If the person gets the Capital assets by will ,or inheritance,gift etc then period of previous owner is also considered to count Long term capital assets .(three years )but indexation is to be done from the date when assessee gets the ownership.

From the above conditions if the land is a long term capital assets then your client is eligible to claim the deduction under section 54 EC if he purchase capital gain Bond by NABARD or REC.

To claim Section 54F following conditions is to be satisfied.

1. person has sold long term capital asset other than residential House
2. person has purchased with in one year before from date of transfer or with two year after the transfer of long term assets or construct a house with in three years from date of transfer of long term asset in present case Land.

Reinvestment of capital gain in Land is not covered under section 54EC or 54F and there is no benefit for Purchase of land as such.but if your client is interested in claiming section 54F then amount used to purchased the land will also be considered to claim deduction under 54 F provided new residential house is to be completed with in prescribed time given in the sectionon the same land, that is 3 year from the date of transfer of original long term assets i.e Land in present case.(subject to some other conditions)

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