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STUDENT.... (.......)     21 May 2012

Long term capital gain

Hi Team,


I have a question on Long Term capital Gain.


My Grand Father has owned 1 property in Yr. 1971 and has a wife, 4 son (All Married) and 3 Daughters (All Married).


During his life time he has (My Grand Father) gifted his property in Yr. 2004 to 3 of his son.


Now with this property my father and his 2 brother's has gained a Long Term capital Gain (LTCG) for e.g. 1Crore EACH.


My Dad has a Land and he is the 2nd owner of the same and the 1st owner is my sister(Un-Married).



Now my Question on the above mentioned information is as follow:



1. How can we save tax on the Long Term capital Gain.

2. Is it possible that he can spend 25% of Long Term capital Gain to build a house on the land.

3. Is it possible that he can also spend the rest of the money 75% in buying a new house

4. Or else if he spend his 25% in NHAI or REC Bonds and rest 50% in Buying a new house.

5. For saving Long Term capital Gain is it necessary that the investment/buying a new property/construction should be in all the (THREE GIFTED NAMES) or any individual can take the benefit of Long Term capital Gain.



With my fifth Question I would like to clear the doubt as each one (All 3 Brother's) want's to buy a property on their Name, will all 3 be able to get the exemption on Long Term capital Gain or NOT.



Please let me know weather by following all the above mentioned ways will help him in saving the TAX or not (ALONG WITH ACT/SECTION/SUB-SECTION/PARA/COLOUM), keeping in mind that the property gifted to 3 of his son's.








 4 Replies

Rama chary Rachakonda (Secunderabad/Highcourt practice watsapp no.9989324294 )     25 May 2012

Capital gain arises only on the transferof capital assets.

Section 47 exempts from the purview of capital gain. They are: (a) any distribution of capital assets on the total or partial of a Hindu Undivided family. (b) any transfer of a capital asset under a gift or will an irrevocable trust, 

Sagar Tilak (PROPRIETOR)     27 May 2012

I assume that now your father and his brothers have sold the property which has resulted into Capital Gain of Rs.1 Cr.each.

According to Section 54 (1) of Income Tax Act, Capital Gain arising out of sale of Residential House Property can be reinvested in purchase of new house property or construction of house property. The new hosue shall be purchased within a period of 1 year before of 2 years after the date of transfer. In case of construction of new house, the new house can be constructed within a period of 3 years from the date of transfer of residential house property. As per Section 54 (2) of Income Tax Act, if the assessee is unable to invest the sale proceeds in new residential house properrt immediately, then the amount of capital gains can be deposited in Capital Gains Deposits account with any nationalized bank and exemption u.s 54 can be availed. The said amount shall be utilized within the period mentioned in section 54(1).

Alternatively entire amont can be invested in bonds specified u/s 54EC of Income Tax Act. eg. NHAI, RECL.

In case if you want to construct residential house on the land then balance amount can be utilized of capital gains can be invested in bonds to avail exemption u/s 54EC.

The assessee in whose hands capital gain has arisen is required to utilize the same amount in new hosue property or specified bonds. In your case, you father can build house alone or together with his brothers to claim exemption u/s 54 and balance amount can be invested in 54EC bonds to the extent of Rs.50 lacs. 

C. P. CHUGH (Practicing Lawyer)     30 May 2012

Though you have not mentioned what is the Nature of Property i.e. Whether Residential, Agricultural, Urban Agricultural or commercial property which your GF has purchased in the year 1971.

Now presuming it is agricultural Land, it is beyond the preview of Capital Gain Taxation.

In case it happens to be a Residential House, the entire Long Term Capital Gains, as calculated under the provisions of the Act, can be re-invested into another residential property and is exempt from taxation to the extent it is reinvested (proportionately if not fully reinvested) subject to that such person does not own more than one residential property at the time of reinvestment of LTCG into new residential property.

All three co-owners are entitled for exemption of LTCG on re-investment of their respective shares.

Limit of investment of 50 Lac would also apply to all three joint owners indivually, meaning thereby that each one of them can invest 50 Lacs in REC/NHAI/PFC Capital Gain Bonds under section 54EC.

In case it is neither agricultural nor residential, then entire consideration and not LTCG is required to be invested in acquisition of new asset to claim deduction under section 54F. Proportionate deduction is allowed on short/less investment viz-a-viz consideration.

Finance Act 2012 has also provided a deduction under section 54GB of the Act where-in one can invest LTCG arising from a residential property (including residential land) fo buying equity of a newly formed pvt ltd company and such company on receipt of share subscripttion has to invest the said sum for purchase of new plant and machinery for production of articles or things as specified in the schedule within the prescribed period.

You have many options and explore the one which is best for you.

Saravanan (NA)     15 October 2012


I sold a property and i know abt CGT ,after calculating the inflation ..index..I have a Long Term Capital gain tax for 86 lakhs. I want to know …whether i can invest in 3 Residentail Apartment which costs(45 Lakhs , 25 lakhs and 16 Lakhs ) respectively.

In one of the article some one told ..only one property can be bought to avoid tax..


I am more confused…..pls help

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