Sale of inherited property

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 May 2012 Hi Experts,

I am a salaried employee with annual salary of 10 Lakhs/annum.

I am in the process of selling an inherited property for 30 Lakhs in Madhya Pradesh.

I have spoken with the Patwari (village accountant) about this sale and he has informed that as per government rates, the property is worth 42 Lakhs and he would be issuing me the valuation certificate based on the the ongoing rates as above.

The buyer is willing to give me an advance of 10 Lakhs before the registry and remaining 20 Lakhs on the day of registry.

I want to understand, will I be liable to pay capital gain tax on this sale though the government rates are way higher than the actual sale price? Will I also need to declare this sale somewhere, such as, while filing the tax return or anywhere else?

Also, what would be the safest way to transact this much money, cash, cheque or demand draft? Do the banks issue demand drafts of 30 Lakhs?

Appreciate a timely response.

Thanks.
Rahul

Querist : Anonymous

Querist : Anonymous (Querist)

06 May 2012 To add, its an agricultural land and I am going to invest about 10 Lakhs of 30 in to another residential property within few months.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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24 May 2012 1. The sale of such land is taxable as Long Term Capital Gain.

2. The amount adopted by the stamp valuation authority shall be the sale price for the purpose of computing capital gain.

3. You have to show such income while filing your income tax return.

4. The safest way would be to accept the consideration by way of demand draft.

5. Since you are planning to invest Rs. 10 lakhs in a residential house, you can claim exemption u/s 54F for Rs. 10 lakhs.

6. For claiming the exemption you have to invest the amount by the due date of filing the return.

7. If you are unable to invest the amount by the due date, you will have to deposit the same in a Capital Gain Account with a scheduled bank.

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Querist : Anonymous

Querist : Anonymous (Querist)

24 May 2012 Hello Siddhartha,

Thanks very much for response.

I have two more questions, probably I should have mentioned it while posting the question.

It's a rural agricultural land, which is about 50 KMs away from the nearest municipality. A few posts on the web suggest, that rural agricultural land is not considered a capital asset and thus attracts no capital gain tax (neither long term nor short term).

Is this the case? If yes, do I still need to show this income while filing the income tax return?

Appreciate any further responses.

Thanks.
Rahul

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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24 May 2012 The following conditions should be satisfied:

1. The land must NOT be within a municipal jurisdiction.

2. The population of the area should NOT exceed 10,000 as per the last census.

If these conditions are satisfied then the gain is not taxable.

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