Tax in Property Sale

The capital gains can be utilized only for purchase of another Agricultural Land (urban or rural) within 2 years from the date of transfer. Or else the assessee (ie. your Grandfather) can deposit the amount of capital gains in the Capital Gains Account Scheme till the time of purchase of the Agricultural Land, but he should deposit the amount before filing the Income Tax Return. Also the proof of such deposit should be attached with the Income Tax Return (ie. the Photocopy of Deposit Challan).

I personally would advise you to pay the Long Term Capital Gain Tax and deposit the remaining amount in a normal Term Deposit and live on the Interest earned on the Term Deposit.