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Ramalingam Kalirajan |7374 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 09, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Apr 19, 2024Hindi

My land area 750cents. Offer amount rs.33000/cent Fare value rs.54500/cent. Will take 2 capital gain bond Approximate tax calculation pl.? For purchaser what will be the tax? Purchaser will pay the tax beyond 33000/ cent. Money

Ans: Seller's Tax Calculation (LTCG)
Based on the information provided:

Land area: 750 cents
Offer amount per cent: Rs. 33,000
Fair value per cent (assumed selling price): Rs. 54,500
Assuming you bought the land at a price below the fair value (common scenario):

Capital Gain per cent: Rs. 54,500 (fair value) - Rs. 33,000 (offer amount) = Rs. 21,500

Total Capital Gain: Rs. 21,500/cent * 750 cents = Rs. 16,125,000

Tax on Capital Gain (LTCG):

You have two options to potentially reduce or eliminate your LTCG tax liability:

Option 1: Section 54 - Investment in a New Property

This allows exemption of LTCG if the capital gains are invested in a new residential property within one year before or three years after the sale.
Not applicable in your case since the land is not considered a residential property under Section 54.
Option 2: Section 54EC - Capital Gains Bonds

This allows investing LTCG in specific government bonds within 6 months of the sale to get exemption. The bonds typically have a lock-in period of 3 years.
Since Option 1 doesn't apply, you'll likely need to invest in Capital Gains Bonds under Section 54EC to avoid tax on the capital gain.

Approximate Tax Calculation (assuming Section 54EC is not used):

LTCG tax rate for land is typically 20% with indexation benefit (adjustment for inflation).
However, consulting a tax advisor is crucial for an accurate calculation. They can consider factors like your holding period, indexing benefit, and any other relevant deductions to determine the exact tax liability.
Purchaser's Tax Implications
The purchaser generally doesn't pay tax on the purchase price of the land itself. However, they might be liable for the following:

Stamp Duty: This is a state government levy on property transactions. The rate varies by state and typically falls between 2-8% of the sale price. The purchaser is usually responsible for paying the stamp duty.
Registration Charges: These are fees for registering the property with the government authorities. The rates vary by state but are usually a small percentage of the sale price. The purchaser typically bears this cost as well.
In your case, the purchaser will likely pay the stamp duty and registration charges on the agreed purchase price (Rs. 33,000 per cent) and not the fair value.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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