Help save tax on long term capital gains

Mr.Danny, as the land is held for more than 3 years, it will qualify as long term capital asset and any gain on transfer theoren will be long term capital gain. Now as you said you want to construct a house out of capital gains proceeds, you can do so. According to section 54 F capital gain on transfer of long term capital asset(other than resi.house property) can be invested in purchase of one residential house property in India if assessee doesn't owns any other resi.house property and consequently capital gains shall be exempt provided shall be exempt to the extent such capital gains is invested in the

Purchase of another Residential Property within 1 year before or 2 years after the due date of transfer of the Property sold and/or
Construction of Residential house Property within a period of 3 years from the date of transfer/sale of property

Provided that the new Residential House Property purchased or constructed is not transferred within a period of 3 years from the date of acquisition,if the new property is sold within a period of 3 years from the date of its acquisition, then, for the purpose of computing the capital gains on this transfer, the cost of acquisition of this house property shall be reduced by the amount of capital gain exempt under section 54 earlier. The capital gain arising from this transfer will always be a short term capital gain.

QUANTUM OF DEDUCTION UNDER SECTION 54

Capital Gains shall be exempt to the extent it is invested in the purchase and/or construction of another house i.e.
If the entire amount is equal to or less than the cost of the new house, then the entire capital gain shall be exempt
If the amount of Capital Gain is greater than the cost of the new house, then the cost of the new house shall be allowed as an exemption.
Deposit the amount of capital gains in an an account with a bank in capital gain scheme before the due date of filing return