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Pankaj Trivedi (Service)     20 February 2009

What could be the tax liability?


My aunt is a retired teacher and now a senior citizen. Currently her only source of her income is her pension which is around 8k per month.

Years back she had invested some money in a plot which is now appreciated alot. Seeing to her age she now wnats to clear it off and sell of her plot. May be she may receive around 4-6 lacs.

What could be her tax liability?

Can anyone assist me to help her out, with detailed reply?





 2 Replies

AEJAZ AHMED (Legal Consultant/Lawyer)     20 February 2009


As per your query, you are saying only  "  Years Back ", not provided the exact  year, further did not provided the purchase amount of plot at that time.  So its a problem for computating  the capital gain.  

So, help her from the following Example: 



On the basis of facts given in the query, she purchased the plot in 1974-75. For computing capital gains you have the option to adopt fair market value of the plot as on April 1, 1981 instead of cost incurred in 1974-75. AS the figure has not been provided in the query, the computations have been made on the basis of the cost of plot incurred by you.




On such basis, the indexed cost would work out at Rs 43,650. The long-term capital gain after deducting the said indexed cost from the net sale consideration would work out to Rs 5,56,350. The capital gains tax @ 20% plus education cess @ 3% thereon would work out at Rs 1,14,608. The above amount of tax could have been saved if you had invested the amount of net sale consideration (i.e. Rs 6 lakh in this case) in the acquisition of tax saving bonds within six months of the date of transfer.

You now have an option to buy a residential house within two years or construct a residential house within three years of the date of transfer of the plot and invest the above amount of Rs 6 lakh in such acquisition or construction. However, so much of the above amount of Rs 6 lakh as is not utilised for either of the above-prescribed investments before the date of filing the income tax return should be deposited with a bank in a capital gain scheme account to avail the benefit of above exemption. 


Pankaj Trivedi (Service)     20 February 2009

Hi Aejaz,

I thank you for your detailed response.

It was through oversight that I did not provide the purchase price. I will discuss the issue with my Aunt and obtain the purchase price and try to fit in the formulae you have provided.

I will get back with the outcome or with any further query that I may have.

Once again thanks a lot for your assistance.

Pankaj Trivedi



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