"During his life time he has (My Grand Father) gifted his property in Yr. 2004 to 3 of his son."

"Now with this property my father and his 2 brother's has gained a Long Term capital Gain (LTCG) for e.g. 1Crore EACH."

Cap gain?

S.47(iii) (Transactions not treated as transfer)

Transfer of capital asset under a gift or will or succession or inheritance or devolution

No transfer , No cap gain

Hi Team,

This doesn't clarify my Query as mentioned in the forum.

Please find the below mentioned Query once again for your reference and proper guidance.

Hi Team,

I have a question on Long Term capital Gain.

My Grand Father has owned 1 property in Yr. 1971 and has a wife, 4 son (All Married) and 3 Daughters (All Married).

During his life time he has (My Grand Father) gifted his property in Yr. 2004 to 3 of his son.

Now with this property my father and his 2 brother's has gained a Long Term capital Gain (LTCG) for e.g. 1Crore EACH.

My Dad has a Land and he is the 2nd owner of the same and the 1st owner is my sister(Un-Married).

Now my Question on the above mentioned information is as follow:

1. How can we save tax on the Long Term capital Gain.

2. Is it possible that he can spend 25% of Long Term capital Gain to build a house on the land.

3. Is it possible that he can also spend the rest of the money 75% in buying a new house

4. Or else if he spend his 25% in NHAI or REC Bonds and rest 50% in Buying a new house.

5. For saving Long Term capital Gain is it necessary that the investment/buying a new property/construction should be in all the (THREE GIFTED NAMES) or any individual can take the benefit of Long Term capital Gain.

With my fifth Question I would like to clear the doubt as each one (All 3 Brother's) want's to buy a property on their Name, will all 3 be able to get the exemption on Long Term capital Gain or NOT.

Please let me know weather by following all the above mentioned ways will help him in saving the TAX or not (ALONG WITH ACT/SECTION/SUB-SECTION/PARA/COLOUM), keeping in mind that the property gifted to 3 of his son's.

Regards,

Kunal

Hey Kunal, I dont think you understood what Z enquired. As he already said, there is no capital gain on any asset if your father got it from your grandfather under a will or scheme of inheritance.

Well I assume your father actually sold the asset because that is when capital gain will be calculated.

Now your father can avail options like....

1. Put the capital gain amount in Capital gain account scheme - construct a new house upon it (1 year before, 2 years after) or no CGAS and investment in bonds..... This way he wouldn't need to pay any tax on the gain and the amount invested in CGAS unless used otherwise is also exempt from tax. (Sec. 54 A - property) (Sec. 54EC bonds does not allow investment in CGAS, as you have the option to invest the gain within 6 months in the NHAI or Rural Electrification Bonds)

2. The amount of 25% as used in construction of new house will be exempt if the construction begins 1 year prior to date of sale and ends before completetion of 2 years from the date of sale. (u/s 54A)

3. Well though am not perfectly sure but I guess the amount of capital gain cannot be seggregated into multiple investments under same scheme....As per same section 54A, you have to purchase or construct a new property and not properties, so you can claim exemtion either on 1 or on 2....also you shouldn't own more than 1 property during such calculations, incase you do.

4. Now here again the seggregation occurs, i feel that one cannot invest in multiple schemes or multiple times in the same scheme. Though some one else clarifies it....should be a better go. Therefore he cannot invest party in one scheme and partly in another and claim exemption on both, though he can claim expemtion on one of these.

5. For this one, no it is not necessary. The capital gain is earned by your dad and he has the option to avail the benefits under the scheme, the gain has got nothing to do with the ownership or mutual relation of the owners....and so does the scheme has no influence of ownership subjected to some conditions though. (its LTCG we talk about and not the ownership, unless the property cannot be actually treated as transferred if the co-owners refuses to do so, as the case be).......And again, as i said its abt indiavidual's gain so all 3 brothers should be able to buy the property in their own name.

Lastly, there are various possibilities in tax world, I would prefer reading the applicable sections as also available online on income tax's site. So, go ahead.....good luck, and yea nice question that is !!!

Thanks a lot Mayank and Z for sharing the valuable information.

Appreciating information shared by Mr. Mayank, but according to info provided by Mr. Kunal I think your father is interested in constructing the house instead of buying it. so for 25% of the capital gain is used for construction of house and the same is completed within 3years then no CG on such portion.

@ Pritam Jain: Since the property already sold, we have got the capital gain throgh investing the same in 2 different ways...

by spending some amount (25%) of the long term capital gain in constructing the house and rest will buy a new house but the confusion is still there....

weather the same will give us relif from tax or nt...

Since the information share my Mayank is highly appreciable how ever he has also said "i feel that one cannot invest in multiple schemes or multiple times in the same scheme"....which is confusing....and i'm looking for the same...

so that we can buld the house as well as we can buy a new house and if possible we are ready to enter in third plan as well by investing the amt in Bonds....

well as i said, that is a nice question so i referred some of my material, and some other refernces via internet....all i came up with says the entire sale proceeds must be utilised and the amount exempt will be limited to such amount of investment.....So i still think that your dad can avail exemtion from one of the three sources, and naturally the higest investment...75% as you said, i guess should be aviled.

But still, i would love to be corrected, if i am not. (just a ipcc student, what more to say)

By reading the act i dont find any restriction on the way of desposal of your capital gain amount.

You can invest capital gain partly in order to get exemption in different section of income tax.

suppose you invest 25% in construction and sum more amount in purchase of new property exemption is available for the total amount invested in purchase and amount invested in construction [Sarkar(B.B.) v. CIT(1981)132 ITR 661 (Del)]. Provided such amount is utilised before filing of return or it is invested in capital gain scheme with any of the nationalised bank and obtain a slip to produce to A.O. if required. Later on such amount should be invested for Purchase or construction within 2 years or 3years respeectively in order to obtain exemption u/s. 54

and balance by investing in NHAI bond so you will get exemption 54EC.

I hope your queries are cleared now...

Happy to help

Hmmm....so i wasn't correct thinking that we cannot utilise the amount by seggregating it into multiple schemes.......Thanks Pritam Sir, that is helpful to me too, hope it cleared Kunalji's doubt too....:)