My uncle has sold his property and he deposited the money he received from selling the property. I like to know, if he keeps that amount in his bank account for an year, will that money be taxed? He is a senior citizen and has no income. Should the money be invested to avoid any tax deduction?
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1 Answer
You uncle is liable to pay "Capital-Gains" tax. Essentially the sale price less of cost would be treated as gains. The gains are taxed at 10% without indexation and 20% with Indexation.
The capital gains tax can be avoided if your uncle invests the gains into specified "Infrastructure bonds" or buys another property within a period of 3 years. The funds need to be kept in a separate "Capital Gains" account and not a regular savings account till you buy another property within 3 years.