Sold ancestral property? Know the rules for parking or investing sale proceeds to save tax

financialexpress.com:

Selling a residential property is a huge task. You not only have to work hard to find the right buyer at the right price but also look for ways to park or invest the sale proceeds to save capital gains tax. For instance, Ashok Kumar recently shared with us that he sold his ancestral property in July 2023 and wants to invest the amount received from the sale in a flat to save capital gains tax.

However, Ashok is currently not sure of which property to buy. So he wants to park the sale proceeds in a bank for some time but he is again not sure as to which bank he should choose to park the sale proceeds. Further, he also wants to know whether he will become eligible to earn interest on the amount parked in a bank and whether there are other ways to save capital gains tax other than investing in bonds.

“I have sold my ancestral property in July 2023. I wish to invest in a flat to save the capital gains tax. So I wish to park the money for some time till I decide on the property I wish to buy. Kindly advise me in which bank I can park the funds till the new property is bought. Further, will I be eligible for interest on this amount? Please also suggest ways to save capital gains tax other than investing in bonds,” Ashok said in an email sent to FE Money.

Sudhakar Sethuraman, Partner, Deloitte Touche Tohmatsu India LLP, and Shruti K.P, Partner, INDUSLAW, have answered Ashok’s queries:

Sudhakar Sethuraman: On the assumption that the ancestral property sold was used for residential purposes and it resulted in long-term capital gains, the Income-tax laws allow taxpayers to purchase another house property within two years or construct another house property within three years from the date of transfer.

The money can be deposited