income tax on sale of ancestor property

yadagiri 1
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Pankaji, Namaskar,

I decided to sell out my ancestor property, a house which can be cost about 41 lakhs, in this regard kindly clarify the following.

Is there any taxes to be paid for receiving the amount on the sale, if so how much percentage?. If i deposit the same in the banks whether they deduct the income tax? If i purchased another house or invest on plots with the same amount, what type of the taxes i have to pay?

section-54ec long-term-gains section-54 capital-gains income-tax
1 Answers

If the house has been kept for more than three years, long term capital gains will arise on sale.

Below is an sample computation for LTCG and income tax:

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%

This income tax can be saved fully in two ways:

  1. Section 54: You can buy another residential property within two years of sale, with cost more than capital gains (S, computed above). This exemption won't be available on buying land. If land is purchased, a house needs to be constructed on same within three years of sale. If new house is not purchased before income tax return filing of same year, this gain amount has to be put into capital gain account scheme only before payment for new house.
  2. Section 54EC: Whole capital gain amount (S) can be invested into capital gain bonds (issued by NHAI and REC). Max limit of investment in these bonds are 50 lacs per financial year.
Pankaj Batra5212
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