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Capital Gains Tax on Land Sale: 25 Lakh Deadline & Investment Options?

Yogendra

Yogendra Arora  |34 Answers  |Ask -

Tax Expert - Answered on Apr 16, 2025

Yogendra Arora is the founder of Y Arora Associates And Chartered Accountants, a tax consultancy firm based out of Kanpur.
He has over 11 years of experience in auditing and consultancy.
Before starting his own consultancy, Yogendra, a commerce graduate from CSJM University, Kanpur, worked with ICICI Bank and Indusind Bank as credit manager between 2013 and 2018.... more
Asked by Anonymous - Apr 13, 2025Hindi
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I hv sold land in 25 lacs. Till what time I can keep tgis money without paying tax? Where that money to be parked? I I dont purchase any peopertyvlater on then what is the consequence? Further, do I hv to declare this ltcg in my returns?

Ans: Provided details are incomplete for reply, share complete details then only can guide you.
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Ramalingam

Ramalingam Kalirajan  |8317 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 26, 2024

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I have been allotted a Plot by authority on 25.05.2016 with a circle rate of ? 15,620.00, and i have been deposited the total amount ? 18,74,400.00 with the Hone Loan of ? 10,00,000.00. Further, authority has given me the letter in March 2024 to register the plot and pay the other charges like, Lease Rent One time, Location Charges, Sewer, Water Connection, Registration Charges etc. I have deposited all the charges of total = ? 3,37,242.00 and get registered with stap duty of ? 1,53,000.00 on 17.06.2024 and taken the possession on 18.11.2024. My total expenditure on the plot comes to ? 23,64,631.00 (Including Stamp Duty). I am planning to sell this plot on amount of ? 33,00,000.00 with the revised circle rate of ? 25,900.00. What are my tax liabilities in this transaction (LTCG or STCG) and any suggestion for exemption.
Ans: To determine your tax liability for the sale of the plot, let’s break down the situation:

Important Details from Your Case
Date of Allotment: 25-May-2016.
Date of Registration: 17-Jun-2024.
Date of Possession: 18-Nov-2024.
Total Cost of Acquisition: Rs. 23,64,631 (including stamp duty).
Sale Price: Rs. 33,00,000.
Circle Rate: Rs. 25,900 per square metre (revised from Rs. 15,620 per square metre).
The total holding period and your choice of taxation method will determine whether you incur LTCG (Long-Term Capital Gains) or STCG (Short-Term Capital Gains) and the corresponding tax liabilities.

Is the Gain Long-Term or Short-Term?
The date of allotment (25-May-2016) is generally considered the purchase date for real estate. Since you are selling the plot after holding it for more than 36 months (over 8 years in your case), your gain qualifies as Long-Term Capital Gain (LTCG).

Calculating the Capital Gains
Sale Price: Rs. 33,00,000.

Cost of Acquisition: Rs. 23,64,631.

Capital Gain: Rs. 33,00,000 – Rs. 23,64,631 = Rs. 9,35,369.

Taxation Options for LTCG (as per the updated rules for sales after 23-Jul-2024):

Option 1: Tax at 12.5% without indexation.

Tax = 12.5% of Rs. 9,35,369 = Rs. 1,16,921 (plus applicable cess and surcharges).
Option 2: Tax at 20% with indexation.
Indexed Capital Gain = Rs. 33,00,000 – Rs. 31,15,434 = Rs. 1,84,566.
Tax = 20% of Rs. 1,84,566 = Rs. 36,913 (plus applicable cess and surcharges).
Choosing the Better Taxation Option
Option 2 (with indexation) is clearly more tax-efficient in this case.
You will pay a lower tax of Rs. 36,913 instead of Rs. 1,16,921 under Option 1.
Suggestions for LTCG Exemption
To further reduce or eliminate your LTCG tax, you can explore the following exemptions under the Income Tax Act, 1961:

1. Section 54F: Invest in a Residential Property
If you use the sale proceeds to purchase or construct a residential property, you can claim exemption under Section 54F.
Conditions:
You must not own more than one house property on the date of transfer.
The new property must be purchased within one year before or two years after the sale, or constructed within three years.
The entire sale consideration should be utilised to claim full exemption.
2. Section 54EC: Invest in Specified Bonds
Invest up to Rs. 50 lakhs in NHAI or REC Capital Gain Bonds within six months of the sale.
The investment is locked in for five years and offers a safe, tax-saving option.
3. Capital Gains Account Scheme (CGAS)
If you cannot immediately utilise the sale proceeds, deposit them in a CGAS account before the filing deadline.
This allows you to keep the exemption intact while planning future investments.
Final Insights
Your plot sale qualifies for LTCG tax. The 20% with indexation option significantly reduces your tax burden.
To minimise tax, consider reinvesting under Section 54F or 54EC.
Consult a Certified Financial Planner or tax expert for tailored advice on reinvestment options and compliance with timelines.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

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