How to save capital gain tax on sale of land?

Any type of income has certain tax implications. If you have a land parcel which you are planning to sell off then you should also know about the tax rules around such sale. Land being a capital asset invites capital gains tax. There are two types of capital gains tax - short term capital gain tax and long term capital gain tax. The exemption on short term capital gain is applicable in just a few cases. In this answer we will talk about how to save capital gain tax on sale of land. Read on.

To ascertain how to save capital gain tax on sale of property, you must first know a little bit about short term capital gain and long term capital gain. STCG are gains from the sale of land or property which was held for less than 36 months, whereas LTCG are gains from the sale of land or property which was held for more than 36  months. STCG is taxable at the rate of 15%, whereas 20% rate is applicable at LTCG.

The ways to save capital gain tax on sale of land are as follows:

• You can purchase a house within 1 year prior to the date of transfer of land or 2 years after that

• You must construct a house within 3 years after the date of transfer

• You must not own more than 1 residential house apart from the new one on the date of transfer

• You can be eligible for tax exemptions if you invest in capital gains account scheme

• You can purchase capital gains bonds which can’t be sold for at least 3 years.

If you have a short term capital gain, you will be exempted from the tax in following conditions.

• For Indian Residents below 60 years of age, if the capital gain stays within Rs. 2,50,000.

• For Indian Senior Citizens, if the capital gain stays within Rs. 3,00,000 

• For super senior citizens, the tax exemptions are gain of up to Rs. 5,00,000

• NRI can avail tax exemption if the SCTG is within Rs. 2,50,000.

These are the ways on how to save capital gain tax on sale of land.