Personal Finance

Your Taxes

Sanjiv Chaudhary | Updated on January 19, 2018 Published on January 31, 2016

I purchased a plot for ₹75,000 some 20 years back. I sold it for ₹17 lakh (market value) last month. If I reinvest this amount in buying another plot, can I get exemption from LTCG tax? What are the other ways to get exemption from LTCG tax? I am a pensioner.

DM Rao

According to the provisions of the Indian Income Tax law, any capital asset held for more than three years (other than specified securities) will be treated as a long term capital asset (LTCA). Long-term capital gain (LTCG) on transfer of such LTCA shall be computed by deducting from the gross sale consideration received or accruing on sale of the LTCA the following amounts, namely, the indexed cost of acquisition of the asset and the indexed cost of improvement and expenditure incurred wholly and exclusively in connection with such transfer.

Since the plot sold is LTCA, the entailing LTCG shall be exempt from tax if the entire sale consideration is invested in a new residential property located in India within the specified timeframes (within one year prior to date of sale or two years from the date of sale for purchase of property or within three years for construction of the house property).

The purchase of the plot alone will not be eligible for the exemption. You will have to construct the residential property on that plot within three years to get tax exemption.

You can also invest in specified bonds issued by the National Highways Authority of India or Rural Electrification Corporation within six months from the date of sale of the plot, to claim the tax exemption.

Please note that the investment in new property or specified bonds has a lock-in period of three years. Accordingly, if the new property or the bonds are sold/converted into cash within a period of three years, the exemption claimed from LTCG in respect of the plot shall be revoked in the year the new property or bonds are sold/converted to cash, as the case may be.

My son, after completing MS in the US, is employed there. He transfers money saved from his salary to my account and my wife’s bank account. We put the money received in term deposit in the same bank. Is the money received from my son taxable?

Suresh K

According to the provisions of the Income Tax Act, 1961, where any sum of money is received without consideration from any person exceeding ₹50,000, the whole of such sum is chargeable to tax as income from other sources. Such sum, however, is not taxed in certain cases, for example, if any sum of money is received from any relative as defined in the relevant provisions, which includes children. The gift received by you and your spouse from your son falls under the definition of gift received from a relative. Hence, the same is not taxable in your/your spouse’s hands.

It is pertinent to note that the income earned by you/your spouse from investing such gifted money will be your/your spouse’s income and will, accordingly, be included in computing your respective taxable incomes.

The writer is a practising chartered accountant. Send your queries to

Published on January 31, 2016
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