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Capital gain on land purchase in the name of minor son

Pawan Mittal (CA Final) (711 Points)

17 August 2013

Dear Expets,

One of our clients Mr. X purchased a land in the name of his Minor son for Rs. 1 lakh in 2004. The amount was paid from the bank account of Mr. X. In 2008 his son attained majority. Now today in 2013 Mr. X wants to sell the land for Rs. 20 lacs.

Now please tell me the tax implications. Whether the capital gains will be assessable in the hands of Mr. X or his son?

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1 Replies

Mihir (Wealth Manager) (5293 Points)
Replied 17 August 2013

LTCG computation:

Sale consideration: Rs. 20,00,000/-

Less indexed cost of acquisition: 195,625/-

LTCG - Rs. 18,04,375/-

LTCG tax - Rs. 367,370/-

Since the son has become major, he can file his return and show LTCG. If he fails to avail exemptions u/s 54 or 54F or 54EC, the tax of about 3 lacs shall be payable by Mr. X. And if the son invests as per section 54 and there is nil tax liability, Mr. X shall, too, have nil tax liability. Clubbing provision shall apply here.