I sold land for 50lakh . I need to pay income tax 10lakh as capital gain tax . To avoid tax , I wish to invest in 17 lakh in power finance corporation , 17 lakh in Rural electrification corporation , 16 lakh in Indian railway finance corporation under 54EC capital gain bond for 5 yrs with interest 5.25%.. shall I choose Gold bond for availing capital gain tax ..please advise .TKS

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

Ans: Capital Gains Tax Calculation for Land Sale in Chennai (Disclaimer: This is an estimate, consult a tax advisor for specific calculations)
Here's an approximate calculation of your capital gains tax for selling 750 cents of land in Chennai:

1. Capital Gains Calculation:

Total Sale Value: 750 cents * ?33,000/cent = ?24,75,000
Fair Value (Assuming Used for Cost Calculation): 750 cents * ?54,500/cent = ?40,87,500
Capital Gains: ?40,87,500 (Fair Value) - ?24,75,000 (Sale Value) = ?16,12,500
2. Taxable Capital Gains:

You can potentially claim exemptions under various sections of the Income Tax Act, 1961. Here are two possibilities:

Section 54: This allows exemption of capital gains tax if you invest the gains in a new residential property within one year before or three years after the sale. However, this exemption might not apply since the land you're selling is not considered a residential property.
Section 54EC: This allows exemption if you invest the capital gains in specific government bonds within 6 months of the sale.
In this scenario, without considering any exemptions, your taxable capital gains would be ?16,12,500.

3. Capital Gains Tax Rate:

The capital gains tax rate for land depends on the holding period:
Short-term capital gains (held for less than 2 years): Taxed at your income tax slab rate (can be up to 30%).
Long-term capital gains (held for more than 2 years): Taxed at 20% with indexation benefit (adjusts for inflation).
Without knowing the holding period, we can't determine the exact tax rate.

4. Capital Gains Tax with Bonds (Section 54EC):

If you choose to invest in specific government bonds under Section 54EC within 6 months of the sale, the entire capital gains amount (?16,12,500) can be exempt from taxation.
5. Purchaser's Perspective:

The purchaser generally doesn't pay capital gains tax on the purchase.
However, they might need to pay stamp duty and registration charges on the purchase price of the land as per the prevailing rates in Chennai.
Important Note:

This is a simplified explanation, and tax laws can be complex. For an accurate calculation of your capital gains tax liability, consult a qualified tax advisor in Chennai. They can consider factors like your specific situation, holding period, and any applicable exemptions to provide the most accurate estimate.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Hello;

The simple interest on PFC 54 EC Capital Gain bond is currently 5.25%.

My suggestion is this is a better option then the 7.25% cumulative FD on 4 L after tax payment.

Ultimately it is his choice.

Another option is to utilise provisions of Section 54 of income tax act for seeking exemption by reinvesting LTCG in purchase of another residential property, subject to terms and conditions, but for 5 L ltcg, I do not think this is helpful.

Best wishes;