I bought a land plot in July 2018 for Rs 15.00 lacs, then I constructed a house on it in the same year which cost me Rs 40.00 lacs. In March 2021 I sold the whole property for Rs 98.50 lacs and bought land consisting of apple orchards worth Rs 65.00 lacs in the name of my adult children. Kindly intimate whether I or any of my children is liable for any tax payment. If yes, is there any way of tax exemption.

Ans: Tax Implications on Rural Agricultural Land Sale
Rural agricultural land is not considered a capital asset in India.

Hence, any gains from the sale of such land are not subject to tax.

This exemption applies regardless of the profit made from the sale.

The gain from selling rural agricultural land is completely tax-free.

Sale of Agricultural Land in Your Case
You bought the land in 2019 for Rs. 17 lakhs, with a 50-50 partnership.

The land was sold in March 2025 for Rs. 20 lakhs, resulting in a gain of Rs. 3 lakhs.

Your share of the sale proceeds amounts to Rs. 10 lakhs.

As the land qualifies as rural agricultural land, the gain from the sale is exempt from tax.

Tax Calculation for Your Sale
Since the land is not a capital asset, the profit you made is not taxable.

You do not need to pay tax on the Rs. 1.5 lakh gain from your share of the sale proceeds.

There is no tax liability on the sale of rural agricultural land, regardless of the amount.

Reporting the Sale in Your Tax Return
Even though the gain is exempt, it’s advisable to report the sale in your tax return.

You should disclose the sale under the 'Exempt Income' section in your Income Tax Return for clarity and transparency.

This helps keep everything in order and avoids any potential issues with future tax filings.

Reinvesting the Sale Proceeds
The proceeds from the sale can be reinvested in mutual funds and equities to grow your wealth.

A diversified portfolio of investments can help balance risk and returns.

Consulting with a Certified Financial Planner will ensure that your investments align with your financial goals.

A well-structured investment plan can lead to wealth accumulation over time.

Final Insights
The gain from the sale of your rural agricultural land is tax-free.

You can freely invest the Rs. 10 lakh proceeds from the sale.

There is no need to pay tax on the Rs. 1.5 lakh gain.

Report the transaction under exempt income in your tax return.

Work with a Certified Financial Planner for expert advice on investing the proceeds.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

Ans: Yes, there can be tax liability, depending on how the transaction is treated:

If treated as Capital Gains (land held as investment, no development done):

Land held since 2019, so Long-Term Capital Gain (LTCG) applies.

Sale Amount: Rs. 1 crore (in F.Y. 2024–25 and 2025–26)

Purchase Price: Rs. 40 lakh (indexed)

Capital Gains: Rs. 60 lakh (approx., after indexation)

If you buy a residential house (not just a plot) worth Rs. 80 lakh in 2025–26:
You can claim full exemption under Section 54F, since all sale proceeds are reinvested.

No tax liability in that case.

If you only buy a residential plot (without constructing a house within 3 years):
No exemption under Section 54F.
You will pay 20% LTCG tax on indexed gains in proportion to sale in each year.

E.g.,

If Rs. 50 lakh was received in 2024–25 → LTCG tax applies in that year.

If Rs. 50 lakh was received in 2025–26 → tax applies in that year.

Please note:
Buying only a plot won’t save tax. You must construct a house within 3 years for exemption.

Let me know if you want help estimating indexed cost or LTCG year-wise.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment