Sir, my mother has brought a vacant land in Bangalore in 1995. All most 22 years land. Now we have sold the land for Rs. 30,00,000/- to one of the purchaser on 12th Sept 2017. My mother age is approx 55 - 60 years. Please inform whether we need to pay income tax. if my mother divides the amount equally to my sister and their daughters whether we need to pay tax or it will treat as gift. Also please inform how to exempt tax. We are very poor and trying to sell land for my sister daughters marriage of 2 siblings. if we gift the amount for them equally whether it is exempted from income tax. Please help us.
Sir, my mother has brought a vacant land in Bangalore in 1995. All most 22 years land. Now we have sold the land for Rs. 30,00,000/- to one of the purchaser on 12th Sept 2017. My mother age is approx 55 - 60 years. Please inform whether we need to pay income tax. if my mother divides the amount equally to my sister and their daughters whether we need to pay tax or it will treat as gift. Also please inform how to exempt tax. We are very poor and trying to sell land for my sister daughters marriage of 2 siblings. if we gift the amount for them equally whether it is exempted from income tax. Please help us.
Gifting won't exempt the capital gain taxes.
As per your case,
I would advise the following:
1. Invest 30 lacs in 54EC bonds, which shall exempt the capital gain taxes.
2. Money received from such bonds, when redeemed after 3 years, can be gifted to the siblings.
3. Interest earned on the bonds in 3 years shall, however, be taxable
Mam thanks for your valuable reply. Actually we are very poor and sold this land for my daughters sister marriage ( 2 Nos). My mother sold the land for them and we give Rs. 15,00,000/ each as gift. If we invest to bond we do not have money for marriage. Also please inform whether we need to put full amount of Rs. 30,00,000 in case of bond and we shall invest Rs. 20,00,000 in bond and the remaining amount of Rs. 10,00,000/- can be utilized in this case any again we need to pay tax. Please inform and help us. How to exempt taxes
Hi,
Your mother will have to pay tax on the capital gain earned by her on the land sold by her. If there is a capital gain loss, then there will not be any tax payable.
To calculate the amount of capital gains, the indexed cost of the land as on 1 April 2001 will be reduced from the sale consideration received on sale of the land. You can use the Registrar's value of the land as on 1 April 2001 to find the capital gain.
The indexed cost of land will be the value of the land as on 1 April 2001, multiplied by the inflation index for the year of sale 2017 (i.e. 272) and divided by the inflation index for 2001 (i.e. 100).
If you reduced this indexed amount from the sale consideration, then you will get the amount of capital gains that you have earned from the sale of the land. If there is a gain, then tax is payable. If there is a loss, then no tax is payable. There are cases, where there is a capital loss since we will be taking a assumed value as on 1 April 2001.
If you want to save tax, then you can invest in a residential property or invest in NHAI or REC bonds.
The amounts gifted by your mother to her children and grandchildren will be exempt in their hands.
Trust this clarifies.
Regards,
Keerthiga Padmanabha
M.Com, CA, LL.B
To answer your follow up question, you need not invest the entire 30 lakhs. You have to invest only the capital gains amount. You can use the remaining amount for the marriage.
Trust this clarifies.
Regards,
Keerthiga Padmanabha
M.Com, CA, LL.B
Dear Madam, Thanks for your valauble reply. As per your reply i.e, "The amounts gifted by your mother to her children and grandchildren will be exempt in their hands". If my mother gift the money to my sister and their 2 grand daughters so the tax can be exempted please inform. if Yes, please inform what is the procedure to transfer the money to the children and grand daughters
Hi,
Your mother will continue to be liable to pay the tax on capital gains.
The gift received by her children and grand children will be exempt from tax for them. She can gift them the amount through any banking channels or cash, but it is advisable to issue a cheque.
Mam, thanks but as per your calculation investing Rs. 29,00,000/- in bond and remaining only Rs. 1,00,000 for marraige for my sister daughters it is difficulty. as you aware doing a marriage is having lot of conclusion and others. Please help me how to save tax from my mother side and also to my sister. Please refer the link "Investing in your parent's name" http://www.dnaindia.com/money/comment-here-s-how-you-can-save-tax-by-gifting-money-legally-2062397. I need 0% income tax. Can I invest Rs. 15,00,000 in bond for 3 years and Rs.15,00,000/- for my sister daughters marriage by giving them in gift of money.
What was the purchase value in 1995 and as on 1 April 2001?
The purchase value in 1995 is Rs. 1,00,000/- + 2% brokerage fees. As on 1st April 2001 i do not know what is the value of vacant land. Now we have sold the property at Rs. 30,00,000/- + 2% brokerage fees.. I am really thank full for helping me in this regard. Mam please help me to save the tax. Hope you understand us. we are very poor and sold the land for marriage
In case you need liquid funds before 3 years, there is no other option but to pay capital gain taxes.
If you are investing some amount out of the total consideration, proportionate taxes shall have to be paid.
Also, note that since it is a sale of land, the entire consideration of 30 lakhs is to be invested and not just the capital gain amount so as to save complete taxes.
Had it been sale of a house property, then only the capital gain amount had to be invested and you could have used the remaining amount for marriage.
Do not calculate the capital gain by taking the amount of acquisition as 1 lakh. You should take the value of property as on 1 April 2001. You can try checking whether your Registry Office provides it online or you make an application to them for it. Alternatively, if anybody has purchased a land in a similar locality, then you can take that value too.
A substantial amount of tax will be saved if you calculate the capital gain correctly.
Hi,
Just to complete, if you are investing in another residential property than entire 30 lacs needs to be invested. However, if you are investing in bonds, then you just need to invest the capital gain amount.
Hi,
1. Sale of the property will attract capital gain tax.
2. You can invest the money equals to capital gain amount in order to save taxes.
Remaining money can be used for the purpose of marriage.
Hello Sir,
Could you please visit the registrar and get us the valuation of your land as on 01st April 2001, only then we shall be in a position to help you save up on taxes and use your money for the marriage without any hassle.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
