long term capital gain tax on sale of land.
prakash
(Querist) 21 July 2010
This query is : Resolved
ours is a partnership firm.we purchased a piece of land in firm's name to do the business.There are 2 partners including me.My partner intends to retire from the firm by settelling all his accounts.After the retirement of my partner I shall become a proprietor and I wish to sale the land after his retirement.The long term capital gain will be a hefty amount.Is there any scheme to save the long term capital gain tax? Please advice what to do?
soumitra basu
(Expert) 22 July 2010
you can invest the capital gain in specified investement under section 54EC of the Income Tax Act within six months from the date of sale
Vineet
(Expert) 22 July 2010
Dear Mr Prakash
As the other partner retires, the situation is nothing but dissolution of partnership firm. Hence the Frim shall be liable to pay Capital Gains Tax on the land coming to your share with the fair market value as on date of dissolution as full value of consideration.
As the firm ceases to exist after this event, the Long Term Capital Gains Tax cannot be saved under any provision. There will not be any seperate tax liability in your hand except partner's liability to discharge all liabilities of the firm.
If you sell this land within three years of dissolution, you will be liable to pay short term capital gain tax on difference of actual sale consideration and above FMV considered as cost.
