Hi sir, I am planning to sell my ancestral property worth of 2 crores and what should I do to avoid tax issues and how should I invest that fund to avoid tax concerns

Ans: To save tax, you can acquire house property and get exemption u/s 54F. As per section 54F, if you want to buy a residential house property from long term capital gain from sale of shares then you must buy the residential house property 1 year before or 2 years from date of such transfer of shares or construct the house property within 3 years from date of transfer of such shares. If amount can not be utilised before filing return then amount should be kept in CGAS.

To get the benefit of Sec 54F, person should not own more than one house property on the date of transfer of asset and not on the date of acquiring new residential property.

Ans: Amount given by father to son as gift is not an Income. Thus, no tax is applicable.

Ans: Here are some pointers to help you understand the options available regarding tax optimisation and indexation benefits for your situation in India. Remember, consulting a qualified tax advisor is crucial before making any investment decisions.

Capital Gain Tax and Exemptions:

In India, capital gains exceeding Rs 2 crore from the sale of immovable property (like land and buildings) are subject to a 20%

Long-Term Capital Gains (LTCG) tax.

However, you have two main options to avoid paying LTCG tax:

1. Invest in Residential Property:

• You can reinvest the Rs 2 crore or more (up to the total capital gain amount) in a new residential property within India within 2 years before or 1 year after the sale of the old property.
• This reinvestment fully exempts you from LTCG tax.
• Note that the new property must be purchased in your name, your spouse's name, or your minor child's name.

2. Invest in Capital Gain Bonds:

• You can invest up to Rs 50 lakh per financial year in specified bonds issued by the government under Section 54EC.
• This investment will partially exempt the invested amount from LTCG tax.
• The lock-in period for these bonds is 3 years.
• Remember, this option only covers a portion of the total capital gain.

Indexation Benefits:

• Indexation helps adjust the cost of acquisition of the asset for inflation, potentially reducing the taxable capital gain.
• You can use the Cost Inflation Index (CII) published by the government to calculate the indexed cost of acquisition.
• This will reduce your taxable capital gain, potentially lowering your tax liability.

Things to Consider:

• Both options above have specific requirements and limitations. Carefully evaluate your financial goals and risk tolerance before choosing an option.
• Consult a qualified tax advisor to understand the nuances of each option and its impact on your specific situation.
• They can also help you with indexation calculations and ensure you claim the maximum possible benefits.

Disclaimer:

This information is for general guidance only and does not constitute tax advice. Please seek professional advice from a qualified tax advisor before making any investment decisions.

Ans: 01. This transaction would generate LTCG of big amount. You may calculate your LTCG with 12.50% without Indexation or 20.00% with Indexation. You can choose the better option.
02. The best way seems to Invest this amount in House Property, in which case your both Cash & Bank amounts will be absorbed. Besides Regular Income from this property (like Rental income etc.), Capital appreciation would give you substantial push. Another justification of this Investment would be to save big on LTCG tax.
Most welcome for any further clarifications. Thanks.