My sister gifted me Rs 37 lakh from land sale. Will she have to pay income tax?

These are a set of queries raised by ET Wealth readers, which have been answered by our panel of experts.

My sister and I received Rs 37 lakh each from the sale of agricultural land in our native place. She has gifted her Rs 37 lakh to me. Will she have to pay capital gains tax on the gift to me?

Umesh Kumar Jethani Founder, ApkiReturn: Whether your sister will incur capital gains tax depends entirely on the classification of the agricultural land sold, rather than how she utilises or gifts the proceeds afterwards. Under the Income Tax Act, 1961, if the property qualifies as rural agricultural land (based on specific population and distance criteria from municipal limits), it is not considered a capital asset, and no capital gains tax arises on its sale.


However, if the property was urban agricultural land, it is classified as a capital asset. In that case, your sister is legally liable to pay capital gains tax on her Rs 37 lakh share of the sale proceeds, computed after deducting the indexed cost of acquisition and claiming any eligible tax exemptions (such as under Section 54B or 54EC). The subsequent gift of Rs 37 lakh to you does not create a capital gains tax liability for your sister.

Also, a gift received from a sister is not taxable in your hands as she qualifies as a specified relative. However, any income you subsequently earn by investing the gifted amount will be taxable in your hands.

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I recently received Rs 50 lakh from the sale of a property. I do not need the money immediately but want to generate long-term wealth while keeping risk moderate. Should I invest the amount as a lump sum or through an STP?

Ravi Kumar TV Director, Gaining Ground Investment Services: A balanced approach would be to invest around 25-30% of the intended equity amount now and move the remaining amount gradually through an STP over the next 24 months. This allows the money to start participating in the market while reducing the anxiety of investing the full amount just before a possible correction.

The STP should follow a fixed schedule, like a weekly STP, and should not be repeatedly changed based on market news. For a moderate risk appetite with a time horizon of 7-10 years, you may consider an allocation of 50% in equity funds, 20% in hybrid funds like balanced advantage funds, 20% in high-quality debt or fixed-income investments, and 10% in gold. The equity portion can be spread across flexi-cap, multicap, and midcap/small cap funds.

Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right away. Email ID: etwealth@timesgroup.com