Income Tax on Short Term Capital Gain

As stated, the land seems to be received without any adequate consideration, so the period for which the land was owned by previous owner will also counted and then sale of Land will be a Long Term Capital Gain.

Exemption can be sought u/s 54.

Any other views are welcome..

Dear Rahul,

Friend Sunali has rightly pointed out the concept - Proportionate cost of the previous owner shall be included as COA.

For determining nature of gains- period for which the land was occupied by the previous owner shall also be considered.

If the total period exceeds 3 years then -

 - Gains will be Long Term

 - Indexation will be from the date of acquisition by previous owner

 - For tax saving point of view - You have Sec 54F - Acquiring a House but if your mother is already having 2 houses then this benefit cannot be claimed.

 - Apart from above - u have Sec 54EC- Investment in REC/NHAI Bonds- upto Rs. 50 Lakhs

 - Both the above option can also be looked in simultaneously. 

 - Any residual gain will be taxable @ 20% after reducing the unexhausted exemption limit.

If total period is less than 3 years

 - The gain will be short term

 - No special tax saving incentives are available - Usual deduction upon investment of Rs. 1.20 lacs can be claimed

- Any residual gain will be taxable as per slab 

Many thanks Sunali & Amir for their quick thoughts.

Yes, we have to take into account the period for which the land belongs to the previous owners too which is more than 10 years, at least.

I wish it would be Long Term Capital Gain...

Thanks amir, good explanation