DO YOU KNOW WHAT CAPITAL GAIN TAX IS? 

A profit gained on selling a capital asset is known as ‘Capital Gain'. The tax levied by the government on this gain is known as CAPITAL GAIN TAX.

There are various assets that are classified as capital assets and the land is one such capital asset.

The capital gain tax does not apply to the transfer of land due to inheritance as there is no involvement of money transfer. The income tax act has exempted the tax on Gifts received via inheritance or will.

Please not agriculture land does not come under the capital asset, hence there is no capital gain tax is applied on its transactions

SHORT TERM AND LONG TERM CAPITAL ASSET

If the ownership of land is less than 36 months or less, it is considered a short term asset. If held for more than 36 months it is considered as long term capital.

 By Investing in Capital Gains Account Scheme

Finding a suitable seller, arranging the requisite funds and getting the paperwork in place for a new property can be a harrowing and time-consuming process. Fortunately, the Income Tax Department understands these limitations.

If you have not been able to invest your capital gains until the date of filing of income tax return (usually 31st July) of the financial year in which you have sold your property, you are allowed to deposit your gains in a PSU bank or other banks as per the Capital Gains Account Scheme, 1988. And in your return claim this as an exemption from your capital gains, you don't have to pay tax on it. However, you must invest this money you have deposited within the period specified by the bank, if you fail to do so, your deposit shall be treated as capital gains.

What happens if you do not intend to purchase another property, there is no use of investing the amount in a Capital Gains Account Scheme. In such a case, you can still save the tax on your capital gains, by investing them in certain bonds. Bonds issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) have been specified for this purpose. These are redeemable after 3 years and must not be sold before the lapse of 3 years from the date of sale of the house property. You are allowed a period of 6 months to invest in these bonds – though to be able to claim this exemption, you will have to invest before the return filing date. The Budget for 2014 has specified that you are allowed to invest a maximum of Rs 50lakhs in a financial year in these bonds.

Amendment under Section 54EC

Budget 2018 has inter alia proposed an amendment to Section 54EC of the Income-tax Act. This section currently provides for an exemption of long term capital gains("LTCG") on sale of any Long Term Capital Asset provided the capital gains are invested within 6 months from the date of transfer, in certain long term specified assets viz any bond, redeemable after three years and issued on or after the 1st day of April, 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 or by the Rural Electrification Corporation Limited.

Vide the budget, the government has proposed to amend the above section by restricting its scope only to capital gains arising from long-term capital assets, being land or building or both. It is also proposed to provide that long-term specified asset, for making any investment under the section on or after the 1 April 2018, shall mean any bond, redeemable after five years as against the earlier three years and issued on or after 1 April 2018 by the National Highways Authority of India or by the Rural Electrification Corporation Limited or any other bond notified by the Central Government in this behalf.

This amendment will take effect from 1 April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.