Tax QA: Tax Rules And Wealth Transfer Options On Selling Inherited Ancestral Land

Since your father has inherited the land, the cost for computing the capital gains shall be the cost at which the previous owner had purchased it. So, in case your grandfather had bought it, the cost paid by your grandfather will be taken as your father’s cost. Since the property was bought before 1st April 2001, your father can take the fair market value (not higher than the stamp duty value) as on 1st April 2001 as his cost of acquisition. The sale price, reduced by the cost, shall be the long-term capital gains of your father, on which he has to pay a flat 12.50 per cent if he does not wish to invest. He also has an option to pay tax at 20 per cent after applying indexation. He can save capital gains by investing the capital gains in a residential house and/or in capital gains bonds within specified time limits. Yes, he can deposit the money in his savings account. He can also distribute the money among his children after paying tax.

The tax deduction for NPS contribution of an employee is available under Section 123 of Income Tax Act, 2025, which has come into force from 1st April, 2026 upto Rs. 1.50. This deduction is subject to restriction of contribution to NPS account upto 10 per cent of the basic salary and dearness allowance for salaried and for self employed it is capped at 20 per cent of the gross total income. If you are a central government employee or if you opt for the new tax regime, you are eligible for a higher 14 per cent of your basic salary and dearness allowance under section 123.

In addition to the deduction under Section 124 (3), you can make an additional and exclusive deduction of Rs. 50,000/- for contributions made to your NPS account over and above the limit of Rs. 1.50 lakhs. Moreover, the restriction as a percentage of basic salary is not applicable for contributions made under Section 124(3).

For income falling under “Profits and Gains of Business of Profession” and “Income from other Sources” heads, the taxpayers have the option to offer their income under these two heads either on a receipt basis or an accrual basis.

Under the accrual basis, you have to offer the income for tax as and when the right to receive it accrues to you, whereas under the cash basis, you can offer it for tax as and when it is actually received. Since you have not offered the interest income for tax on an accrual basis in the past, you will have to offer the entire interest received for taxation during the year of receipt, i.e. the financial year 2026-2026. Though there is a provision under Section 157 for the grant of relief in case salary for more than twelve months is received in one year, whether in advance or in arrears, there is no similar provision for granting relief in case of income in the nature of interest received for more than one year. So you will have to include the whole of the interest in your income for the current year and pay tax at the slab rates applicable to you.