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Query from: Gautham, Bangalore, India, 07/23/10
Topic: TAXES      Submitted on: Ammas.com
Subject: Is it required to pay capital gains tax on Ancestoral property?.

Hi, If I sell an ancestral property which is transferred to my name through a registered will, would I be required to pay capital gains tax.If so then how much? For eg. Land bought 40 years back @ Rs.50000/- Current value Rs.10000000/-

Please reply.

Thanks & Regards, Gautham

Top experts' rating:   Rate = 3 (1 ratings)
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[ This query closed ]
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Response from: B Sreekanth Reddy,   
Council Member on Ammas.com
Source: http://www.capitalmarket.com/Cmedit…
Long-term capital gains arising from sale of ancestral property is not chargeable to tax if the entire capital gains are invested in specified assets under sec 54EC (bonds of Nabard, RECL, NHB, Sidbi, NHAI) within six months from the date of transfer of ancestral property. The investment in these bonds is subject to a three-year lockin. The returns are between 5-6% per annum and are lower compared to other investment avenues.

Exemption from long-term capital gains tax can also be claimed under sec 54 if the ancestral property sold is a residential property and the entire capital gains is invested in a new residential property.

The income generated from investment of inherited money is taxable in your hands. The basic exemption limit for senior citizens is Rs 185000 under the Income Tax Act, 1961, Besides, deduction from income under sec 80C is available up to Rs 100000 on investment made in specified schemes like public provident fund (PPF), life insurance premium, National Saving Certificates (NSC), equity-linked saving schemes (ELSS) and repayment of housing loan. Thus, no tax is payable on income up to Rs 285000.

Similarly, under sec 80D, deduction up to Rs 15000 is permitted for Mediclaim premium paid by a senior citizen. Calculating backwards, income up to Rs 3 lakh will not suffer any tax.

You can consider the following avenues:

* Invest the capital gains in sec 54 and 54EC instruments.

* Rs 1 lakh can be invested in any specified sec 80C schemes so as to avail full tax benefit.

* PPF gives 8% return. The maximum investment is Rs 70000 per annum Interest on PPF deposits is tax-free.

* Senior Citizens' Saving Scheme gives 9% assured returns. The maximum investment is Rs 15 lakh.

* There is no investment cap on investment in 8% RBI taxable relief bonds.

* Post Office Monthly Income Scheme gives an interest of 8% per annum plus 10% bonus on maturity. Maximum permissible deposit is Rs 300000 in single name and Rs 600000 in joint account.

* Investment in Kisan Vikas Patra will see your money double in eight years and seven months. There is no limit on investment.

* Rs 100 invested in National Savings Certificate will grow to Rs 160 after six years. There is no maximum investment limit.

About 10-15% of your portfolio can be invested in equities either through the stock market or through mutual funds. ELSS are also a good investment option. Most of the ELSS are presently giving more than 15% returns.

Consider debt schemes of mutual funds if you are not prepared to take risk.

Pension plans offered by LIC and mutual funds can also be considered.

Reduce your income burden by gifting some of your investment money to your kins who are in lower/nil tax bracket.

Create a trust and transfer some of the funds there. The income of the trust is assessed separately.

To sum up, invest after taking into consideration your risk tolerance level and after making provision for needs anticipated over the short, medium and long term. Emergency cash available should be approximately three times the average monthly household expenses.

Create an income portfolio in such a manner that your regular interest income stream is equal to your fixed monthly house hold expenses. Regularly monitor your investments.

In order to make your wealth grow you need patience, conviction and a professional approach to managing money. Follow a structured investment strategy. As Rs 3 crore is a big amount, it is critical to have a professional investment advisor whom you trust.

Top experts' rating:   Rate = 3.5 (9 ratings)
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Thank this advisor   
 
Response from: nagesh n2,   
Registered Member on Ask Agent
Source: http://www.rtiindia.org/forum/838-c…
http://www.rtiindia.org/forum/838-c…

Top experts' rating:   Rate = 1.5 (9 ratings)
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Response from: My Advice,   
Registered Member on Ammas.com
Source: This information comes from my own knowledge.

YES you need to pay Capital gains tax

http://www.incometaxindia.gov.in/qu…

Top experts' rating:   Rate = 1 (7 ratings)
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