LTCG on sale of agriculture land in muncipal area

My wife is a housewife and she got a agriculture land transfered in her name after demise of her mother in 2005.Now she wants to sale the land in Feb 2012 at the approximate cost of Rs 10,00,000/ .She is having pan card but not filing any return being no income.She is having one flat in joint name.I will like to know that how save tax on such sale of property.

asked Jan 11 '12 at 12:38 by income_ tax 1116


As land falls under urban area, long term capital gain will apply here and a 20% income tax is payable on capital gains with indexation calculations. Following is the computation of same.

Purchase Year = A, Purchase Cost = P, Cost Inflation Index (CII) for purchase year = X
Sale Year = B, Selling price = Q, CII for sale year = Y
Indexed Purchase price = P x (Y/X) = R
Long term capital gain = Q - R = S
Income tax on capital gain = S x 20%

To save this income tax fully, a new agricultural land has to be bought for amount more than long term gains amount u/s 54B. Or a new residential house/flat can be bought for amount more than sale consideration amount(10 lakh) u/s 54F.

Under 54EC, You can invest the sale consideration amount into capital gain bonds to save income tax. So if you buy capital gains bonds from NHAI or REC, there won't be income tax in that case too.

answered Jan 11 '12 at 14:20 by pankaj 5.2k320

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Dear pankaj, Thanks for reply.If money is put under capital gain bonds under 54EC,then after initial period of 03 yrs ,this money can be withdrawn and can be invested somewhere-else for better return.
(Jan 11 '12 at 15:24) income_ tax
Yes, after 3 years you would be free to invest amount anywhere or use it as you like. Also please note that amount earned by interest of this deposit would be added to taxable income and taxed per slab rates.
(Jan 11 '12 at 15:53) pankaj

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Asked: Jan 11 '12 at 12:38

Seen: 1,380 times

Last updated: Jan 11 '12 at 15:53