I bought a land plot in July 2018 for Rs 15.00 lacs, then I constructed a house on it in the same year which cost me Rs 40.00 lacs. In March 2021 I sold the whole property for Rs 98.50 lacs and bought land consisting of apple orchards worth Rs 65.00 lacs in the name of my adult children. Kindly intimate whether I or any of my children is liable for any tax payment. If yes, is there any way of tax exemption.
Ans: Since the plot+ house is sold in March 2021, it will be treated as Long Term Capital Gain as the period of holding of the property is over 2 years (24 months).
An exemption is not available if long-term capital gains (LTCG) from sale of residential property are re-invested in an agricultural land.
You can claim exemption on LTCG by reinvesting the capital gains in a new residential property (house, not just land) situated in India, within 1 year prior or 2 years after the sale date of the old property (if the house is acquired) or within 3 years (if house is constructed). You can also invest in 54EC bonds for a maximum amount of 50 lakhs subject to conditions.
In this case, since you have invested sale proceeds to agricultural land, the LTCG will be taxed at 20% with indexation.