Can Capital Gains on sale of Property be invested in FD?

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  1. Jalaj

    Jalaj New Member


    My parents bought a land in 94-95 worth Rs. 150000. They are selling it now in 14-15 for Rs. 3000000.
    I have few questions to understand how the tax on capital gain would work in this case:

    1. How much tax they have to pay.
    2. How can they save tax without investing on another property because they want to use the money as their retirement corpus.
    3. Can we park this money somewhere which can yield good interest rates.
    4. Can we park it for 2-3 years in a bank FD and then look for purchasing the property. Would this also entertain tax?
    5. Can they don't show this gain during this year's return file and can show 3 years later if this money is not invested?
    6. Can they also use this money to return a loan taken from a relative, but not documented, would that return amount be exempted if the receiver agrees to show the proof of acceptance now?
    7. Can this amount be used to repay the loan of a property that we own (children owned property more than 3 years old), would that they still be liable to pay tax?

    Please assist so we don't break any tax rules at the same time my parents don't end up paying hefty tax at the age of 56+.
  2. gaurav_kumar

    gaurav_kumar Well-Known Member

    Indexed Cost of Acquisition = 1.5L * 1024/259 = 5.93L

    Capital Gains = 30L - 5.93L = 24.07L
  3. gaurav_kumar

    gaurav_kumar Well-Known Member

    1. As the property was held by you for more than 3 years, the capital gains tax applicable in this case would be flat 20%.
    2. If your parents want to create a Retirement Corpus, they can invest Rs. 5.93L in FD's and the balance Rs. 24.07L in bonds of NHAI/REC. Investment in bonds of NHAI/REC can be claimed as an exemption from Capital Gains under Section 54EC
    3. These are both interest earning investments and are recommended for people who are planning to create a retirement corpus.
    4. It is not necessary for you to purchase a Property as you can claim exemption by investing in Bonds of NHAI/REC
    5. In case you intent to invest after 3 years, you can also park the capital gains in the capital gains account scheme and withdraw the funds from this account whenever you intent to invest. Interest is paid on the amount parked in the capital gains account scheme. Kindly refer:
    6. The amount returned will not help you claim capital gains exemption.
    7. The amount should be reinvested in the name of same person who has sold the property.
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