My father had a land that he acquired from his own source of income i.e the property belonged exclusively to him. We are three brothers and mother is surviving and styaing with us in turns as per her wish. My father has expired since and because none of us is interested in that property, we decided to dispose the land with mom's consent. Now mamma told that the total momey should be divided into three parts and she needs nothing. We got eight lakhs each from that property. The land was acquired long back probably in the 1970s. My question is whether this additional money is to be treated as income and taxed? If so, how to show and how much tax is to be paid?
1 Answers
There will be long term capital gains applicable on this transactions.
Long term capital gains will have to computed first with indexation benefit and the owner(s) of the land will have to shell out 20% income tax on this LTCG.
Below is the sample computation for computing LTCG:
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%
If owners want to save this income tax fully, they would have to invest whole sale amount into a new residential property (individually or jointly) u/s 54F or into capital gain bonds u/s 54EC.
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