How to save on capital gain tax

Hi,

Since the land was bought 30 years back, you will need to get the cost ascertained by a registered valuer as on 01.04.2001. You will get indexation benefit on the same and then you can compute the capital gains on the same. You will need to pay capital gains tax on the same. However you can save the taxes by either reinvesting the entire sale proceeds in a residential property within 2 years of the sale of the land or you can also invest in capital gain bonds. However, since you would need a steady Income, my suggestion would be to pay long terms capital gains tax and reinvest the remaining money which can be used to meet your monthly expenses. Post paying taxes, you can gift the money to your wife and there will be no tax implication there.

Regards,

Nikhil.

- Investment options are very limited against capital gain.

- For a steady income and saving capital gain tax, invest in house property and put it on rent. Second option is investment in bonds and earning interest on them.

- First we need to find out capital gain. Get FMV of land as on 01.04.2001.

- No saving against gift of money to wife.

Thanks

Hi,

Hope you are doing well !

As mentioned by you that you want to use the sale money for generating monthly income.

Simply, pay the long term capital gain tax.

Either give the remaining amount as a loan to someone with interest or reinvest in secured mode.

After Paying capital gain taxes, you can give the money to your wife as a gift. There will be no tax implications on gift.

Thanks & Regards,

Payal Chhajed

If your FMV of land is 60 lakh then it's indexed cost of acquisition will be 1.68 crore and if you sell it for 90 lakh you will incur a loss and you don't have to pay any tax.

And don't gift the amount to your wife because ultimately the income which she earns out of such gift will be clubbed in your income because of clubbing provision.

However I don't think the land which you purchased 30years back for 10 lakh it's FMV for 2001-2002 would be 60 lakh I think it will be around 30-35 lakh.

If we assume it's 30 lakh in that case you will have 6 lakh as capital gain and you can save that by investing in bonds mentioned in section 54EC those 6 lakh which will save your tax as well as provide you some regular income and rest 84 lakh you can give someone on loan to earn 10-12% interest.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

There will be a capital loss in this transaction so need to invest under exemption sections. You can invest in FD or can gift it to the wife

Hi,

There will be a capital loss.

You don't need to invest for any exemption.

You can either reinvest the amount in Fds or give the someone as a loan.

Also, you can gift the money to your wife subject to clubbing provision.

Any income earned from this gift money will be clubbed in your income.

There will be a capital loss and hence there will be no tax. You can invest the sale proceeds as you wish to maximise your returns. You can get in touch with me to help invest that money so as to optimise the returns for you.

Hi,

There will be a capital loss.

You will not be required to pay any capital gain tax.

Further, you can gift the money to your wife without any tax.

For monthly income, you can give extra money as a loan or invest in liquid funds/ FDs.

If the FMV is 60 lacs as on 1.4.2001, then there is not capital gain. In fact, there will be a capital loss.

90 lacs minus (60*2.8) will be your capital loss and you can use the money whatever way you want to use.

Since the land is owned by you, the income arising from sale of the land would be taxable in your hands. Even giving a gift to wife would not shed away your tax liability. To save tax on capital gains, Income tax law provides certain exemptions. In case the entire capital gains are invested in buying a new residential house within 2 years after the sale of land the capital gains would not be taxable. Till such house is purchased the consideration should be deposited in specified bank. Kindly note that this new house cannot be transferred for minimum3 years. You can then lent this new house and earn a monthly rental income. This way you can create an asset and save on taxes and also earn fixed monthly income.