If the husband buys a plot in the name of his wife, then how does the income tax rule apply?

Answer: Purchase of another plot of land by you in the name of your wife will be treated as a gift by you to your wife. As per the provisions of section 64 of the Income Tax Act, when a property is gifted by one spouse to the other, any income on the gifted property shall be clubbed with the income of the spouse transferring such property. required to be added. The clubbing provisions will continue to apply until the asset transferred is converted into another asset. The clubbing provisions shall apply to the income from the property so transferred but to the income so clubbed and arising on further investment income.

So capital gain on sale of both the plots will be taxed in your hands. Tax exemption can be availed on sale of plot held for more than 24 months, either by investing the sale proceeds in a residential house under section 54F or by investing capital gains in capital gains bonds under section 54EC. Since you already have two flats in your name, you are not eligible to avail tax exemption under section 54F.

However, you can still claim exemption under section 54EC by investing in Capital Gains Bonds of Rural Electrification Corporation (REC). National Highway Authority of India (NHAI), Power Finance Corporation (PFC) or Indian Railway Finance Corporation, Your indexed cost of both the plots will be around Rs. comes 18.91 lakh and indexed long-term capital gains of Rs. 56.09 lakhs. Since one can invest a maximum of Rs. 50 lakh in one year and in respect of long-term capital gains of one year, you will have to pay tax at 20% on the remaining long-term capital gains of Rs. 6.09 lakhs. The investment in the bonds is to be made within six months from the date of sale of the capital asset.

(Balwant Jain is a tax and investment expert and can be reached on his Twitter handles jainbalwant@gmail.com and @jainbalwant)