1. Yes you are correct in estimating your Long term Capital Gain of Rs.3 Lacs which will be taxed @ 20% plus cess. Asssuming that the sale value mentioned in the agreement is higher than the municipal value.
2. If you pay the LTCG tax, then you are free to use the proceeds in whatsoever manner you feel comfortable. In case you do not want to pay LTCG tax, then you may invest the CG in LTCG Tax Saving Bonds for a period of 3 years, post which you can use your funds.
3. Yes, feel free to use the Rs. 10 Lacs received in Cash, as that is a part of your Sale Consideration and forms a part of your agreement value.
Trust this clarifies your query.
Feel free to get back/ call back for any further clarifications.
Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP