Ltcg tax on property sale

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Rahul Roy Chowdhury

23 Points Posted on 14 June 2014

Dear All,

We have an ancestral land at my home town, we are planning to sell part of the land. I had few questions with respect to the transaction on the LTCG that shall be applicable

Case- The part of the land that we are teying to sell is worth around 2 crores. This property was build by my grandfather and then post his demise my grand mother and now my mother is the owner. This is a piece of land and not a residential house.

Question 1 - we intend to take an advance on 1.5 crores as advance or the sale of the land in FY 14-15 and based on the calculation should be able to close th deal by Fy 15-16....... will we have to pay any tax on the advance that we are collecting ?

QUestion 2- Sale of land comes under Section 54F - how is this section different from Section 54 and what are the addtionial restriction that we have with respect to saving taxes.

Question 3- can i buy both NHAI Bonds (Section 54EC) and Residential flat in order to reduce my tax liability?

Question 4 - Post completion of 3 years in the new property that i buy.... will i be able to sell the same? In case of land will i be able to buy a property between 1- 3 years?

Question5 - My Mother will be the owner of the property, Can i also take a fresh home loan and add on the money to buy a bigger house ?

Look forward to some quick replies as i need to close the matter asap. Thanks in advance.

Replies (2)

Mihir

Wealth Manager

5358 Points Posted on 15 June 2014

If you sell the plot of land, you may claim exemption u/s 54F and 54EC. Since your mother is the owner of the property, she cannot invest more than 50 lacs in one financial year in NHAI or REC bonds u/s 54EC. She may, however, deposit the money in capital gain account scheme with SBI. She may invest in bonds without 6 months and buy another property within 2 years. She will have to show the advance in your ITR.

Rahul Roy Chowdhury

23 Points Posted on 15 June 2014

Thanks Mihir, one small question. Why should the advance show in the ITR ? The buyer might cancel the deal also and we will have to return him the money back. In that case the tax part doesnt arise. This is more of a security that the buyer is paying in order to have the first right to buy the property. Let me know your views