Query regarding LTCG on sale of residential plot

No exemption is available in respect of LTCG on sale of plot if the reinvestment is in a plot only. The exemption is available in respect of investment in a residential house. So if you are interested in purchasing a residential and construct a house on the same within three years of sale of existing plot, the exemption is available otherwise, it is better to purchase a residential flat.

During the construction period you have to keep the sale proceeds deposited in a special Capital Gains Account.

The exemption available on sale of plot is u/s 54F of the Act, therefore you have to reinvest the entire sale proceeds and not merely the Long Term Capital Gain amount to avail full exemption. Otherwise exemption shall be available on proportionate basis.

Thank you so much for your prompt response.  From your response, I gather that I would have to pay tax on the transaction.  Can you please let me know if I bought the plot in the year 2001 and am selling it in Dec 2009, what would be the indexation benefit available to me?  What would be the rate at which LTCG is levied?  I believe the tax is applicable as follows:

30% of [Sale proceeds - Cost of Acquisition * (Inflation Index 2009 / Inflation Index 2008)]

Also, what costs can be included in the cost of acquisition. For e.g. brokerage, other expenditure such as bank charges for loan processing, etc.

Many many thanks!

LTCG tax payable @20%

For indexatation the relevant values are Cost inflation Index for FY 2009-10 and FY 2001-02 (Assuming plot was purchased after 1st April 2001).  These values are 632 and 426. So your indexed cost of acquisition is = Actual cost of acquisition X 632/426.

Cost of acquisition will include, stamp duty, registration charges, brokerage and other incidental charges, even interest on loan taken for the acquisition of plot if the same has not been claimed as deduction otherwise.

Cost of improvements, if any, indexed based on appropriate year of improvement, is also deductible from the sale proceeds. Brokerage, if any, for selling can also be deducted.

Hi, my mother purchased plot / land for 1L in 2001(with brokerage 5k and Stamp duty of rs 500) It was regularised in 2005 for Rs. 36000 and now it has been sold at 50L on feb 2013(with brokerage of 1L and NOC charges as 30K)

Which of the following options fits me

1) Do i have to invest 5000000 - 100000+30000 = 4870000 to purchase a residential flat costing 53 L so that i would not have to pay any tax, or

2) Do i have to calculate the LTCG which comes at approx 46L and invest it in residential flat considering above amount paid.

   Do in sale of plot, acquition cost is not considered?