Celebrate Freedom with 20% OFF on CAclubindia Pro Subscription. Use Code: FREEDOM20

Way of tax benifit - ltcg arises due to sale of vacant land

Tax planning 712 views 1 replies

NIRMALYA SRIMANI

PROPRIETOR

31 Points Joined October 2011

Anybody enlighten me - relating to a Long Term Capital Gain arises on sales proceeds of a vacant land, value of LTCG is Rs. 20,00,000/-. The assessee has three residential flat. Now he has sold out the vacant land and purchased an another residential flat at cost of Rs. 25,00,000/-. My questions are –

Can he have any exemption, if he invests the LTCG in any specified Capital Gain Account Deposit Scheme?
If he has to pay LTCG on 20,00,000/-, will it be taxed @ 20% after indexation or @ 10% without indexation or it can be paid least of the two option?
It is quite clear he could not avail the exemption u/s 54 or u/s 54F. Is there any way to save the tax on LTCG Rs. 20,00,000/-?

Replies (1)

CA Ashish Pathak

Employed at Cipla Ltd.

2779 Points Joined April 2011

Hello Nirmalya, You have not specified if the land sold was agricultural land situated in any urban area. So Assuming that it is not an agricultural land i suggest following tax planning- Firstly, you cannot deposit the amount in any Capital Gains Deposit A/c Scheme as this facility is available only for sections-54,54B,54D,54F,54G. And none of these sections are applicable in your case. The only possible exemption you can claim is by investing within 6months from date of such sale of the land in specified bonds of NHAI or RECL u/s 54EC of the act. It should be noted that you should not transfer or otherwise convert or take loan on security of these bonds within 3years from the date of investing into such bonds otherwise the capital gains exempted earlier will be deemed to be Income by way of LTCG of the previous year in which you transfer the bonds or take a loan on security of such bonds. Regards.