Hi, my name is Abbas Ahmad. I entered into sale agreement of my property inherited from my mother on 9.2.22 with a deadline for the buyers to get registered on their name as 9.9.2022. I received advance amount of 10 lacs and 22 lac 50 k in two time via RTGS. With that total 32 lac 50 k, I purchased 6 open plots in ventures( 3 on my wife’s name & 3 on my name) @280000/- each. The remaining part payment is yet to receive from them. Technically the said agreement has become null and void as per the conditions in the agreement since they failed to get registered within the deadline. My questions is that the plots which are on my wife’s name are considered for Long Term asset tax exemption. Please clarify.-Regards Awaiting for reply

Ans: Hi Kedarji
Based on your question, apparently on property records, your mother-in-law is the owner of the land. I do not wish to get into the legal heirship aspect of the land post your father-in-law's demise and hence i would restrict my answer within the perspective of your query.

As your MIL is the legal owner and she is the person selling the land, she will be the person liable to tax for the capital gain arising on sale of the NA land.

The distribution of the net sale proceeds to the 3 daughters could be treated as gift backed up with the relevant paper work such as executing the gift deed etc., to ensure that there is no further taxability to the 3 daughters

Ans: No, to claim exemption, amount should be invested by a person who have transferred and amount should be invested in residential HOUSE property.

Ans: The TDS (Tax Deducted at Source) of 1% on the sale of property exceeding Rs 50 lakhs is applicable on the full sale consideration. In your case, since the total sale consideration was Rs 5,973,000, the TDS of Rs 59,730 was deducted as per the guidelines. Based on the information you've provided, you might be liable for Capital Gains Tax. Capital Gains Tax is calculated based on the difference between the selling price and the indexed purchase price. The indexed purchase price adjusts the original purchase price for inflation over the holding period.
The tax on long-term capital gains is usually 20% (plus applicable surcharge and cess) after considering any exemptions or deductions available under Section 54 or Section 54F if you are not investing in another property or capital gains bonds.

To close the transaction and fulfill your tax obligations, you should consider the following steps:

a. Calculate Capital Gains: As explained above, calculate the capital gains based on the indexed purchase price and selling price.

b. Pay Capital Gains Tax: If you decide not to invest in another property or capital gains bonds, you will need to pay the applicable capital gains tax. You can do this by filling out the appropriate sections in your income tax return and paying the tax amount.

c. File Income Tax Return: Ensure that you accurately report the capital gains in your income tax return for the assessment year.

d. Keep Documentation: Maintain all relevant documents related to the property sale, purchase, and tax calculations for future reference