Capital gain tax saving

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Rajkumar Gutti (Querist)
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16 July 2016 MY FRIEND HAVE ONE PIECE OF LAND .WHICH WAS PURCHASED 10 YEARS
BACK , NOW HE WISH TO SELL THIS LAND. APP.SALE VALUE IS RS.40 LAC.
IN ABOVE MY QUERIES ARE AS UNDER.

1) HOW TO CALCULATE CAPITAL GAIN & IT'S TAX.
2) WHAT IS THE SOLUTION TO SAVE CAPITAL GAIN TAX.

YOU ARE REQUESTED TO GUIDE US

THANKING YOU,

REGARDS
RAJKUMAR GUTTI

CA AJAY KUMAR AGRAWAL

CA AJAY KUMAR AGRAWAL (Expert)
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16 July 2016 In case it is an Agricultural Land in rural area, it is not considered as Capital Assets, as such no Capital Gain. (there are parameters to assess the same) Assuming that it is non agricultural land, long term capital gain will accrue in this case, as holding period is more than 36 months. To calculate LTCG you have to calculate indexed cost of land (with Cost Inflation Index notified by I T Deptt) and deduct the same from Sale value Rs 40 Lakhs. In case stamp value is more than Rs 40 Lakhs it will taken as sale value.
Exemption under Section 54F is available, when there is capital gains from sale of a long-term asset other than a house property. A new residential house property must be purchased to claim this exemption.
The new property can be purchased either one year before the sale or 2 years after the sale of the property. The gains can also be invested in the construction of a property, but construction must be completed within 3 years from the date of sale.
In Budget 2014-15, it has been clarified that only ONE house property can be purchased or constructed from the capital gains to claim this exemption. Its important to note that this exemption can be taken back if this new property is sold within 3 years of its purchase.
The entire sale proceeds towards the new house will be exempt from taxes, if you meet the above said conditions.
However, if you invest a portion of the sale proceeds, the exemption will be the proportion of the invested amount to the sale price or exemption = cost of new house x capital gains/net consideration.

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