Exercise one of the following options to save LTCG tax
- Buy or construct ONE house property and save LTCG tax
- The ONE house purchased within 1 year before the date of transfer or 2 years after the date of transfer or construct ONE house within 3 years after the date of transfer.
- Other than ONE above you neither purchase, within a period of 2 years after such date of transfer nor construct, within a period of 3 years of such date of transfer, another house property.
- You do not sell this new house within 3 years of purchase/ construction.
- The New house purchased/ constructed within India.
- You do not own more than 1 residential property (other than the new one) on the date of transfer.
- Invest in 5 years Capital Gain Bond Bonds under sec 54EC in NHAI / RECL /IRFC (AAA rated as highly stable) up to Rs 50 lakhs (Interest 5.75%pa taxable).
- Invest within 6 months but before the date of filing income tax return.
- Can not be offered as security against loans.
Net yield from the above Capital gain bonds is worked out to be @8% pa (after considering 20% LTCG tax benefit and tax on interest on the bond @30%)
In view of the above one may consider exploring other options of investments with higher returns. For example, Post tax return on Balanced Mutual fund works out @13%pa assuming return of @15%CAGR based on past average return of balanced fund over 5 years.
However past return on mutual funds do not guarantee future performance since they are subject to market risk.
Kishore S Hegde