My mother in law bought this land for 40 lakh rupees in 2014 December after selling her mother's ancestral house. Now she wants to sale it for 80 lakh rupees in kota, Rajasthan. How can she save taxes? I read that there is no way she can and she will have to pay tax on her yearly income of 80-40=40 lakhs this year. Thanks
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1) the new property purchased by your mother in law has to be held for a minimum period of three years failing which the capital gains arising from the sale of the new property together with the amount of capital gains exempted earlier will be chargeable to tax in the year of sale of the new property.
2) your MOL should not be in hurry to sell the property
Thank you sir. Can not she buy another property (house or land) immidiately from this gain and save on taxes? Do you mean if she had capital gain of 20 lakhs from her mothers property and 40 lakhs from this one the she will have to pay taxes on 60 lakhs? And again is there no way to save on these taxes? Not even by buying a house or land again from this money?
No your mother cannot buy another property immediately and save on taxes
2) your MIL will have to pay taxes on Rs 60 lakhs
By investing sale proceedings purchase of agriculture land payment of income tax can be saved
1. Yes, she shall have to pay the short term capital gain tax for selling the property with in one year of its purchase,
2. She can get the appropriate rebate on it if she invests the amount in buying a dwelling house for her use.
1. She shall have to pay short term Capital Gain Tax on her gain in the Capital being Rs. 40 Lakhs with in one year,
2. She can save the said amount if she invests the amount bin buying a dwelling house for her.
1. The sale will be taxed as short-term capital gain as she has held the property for less than 3 years. The relevant date is the date of registration.The sale proceeds will be calculated on the basis of the valuation adopted by the state's Stamp Duty and Registration Authority and will not be the amount mentioned in the deed of conveyance.
2. You can claim tax exemption on the long-term capital gain on the sale of a house. To avail of this exemption, you must use the entire profit to either buy another house within two years or construct one in three years. If you had already bought a second house within a year before selling the first one, you could still avail of the tax exemption. Such capital gain exemption is reversed and the amount taxed as capital gain if the new property is sold within three years of the date of purchase/construction. This profit will be considered a short-term gain and taxed at the normal slab rates, not the 20% beneficial rate.
