This investor faces a Rs 16 lakh LTCG tax liability after selling property. Should she claim a tax exemption or invest the proceeds in mutual funds?

This 57-year-old investor faces an LTCG tax liability of around Rs 16 lakh after selling land near Jewar airport. Should she claim a tax exemption or pay the tax and invest the proceeds elsewhere? Here is a little help, as reported by ETWealth.

The investor is considering two options which includes reinvesting the proceeds in another property of a similar value to claim the available tax exemption, or paying the LTCG tax and investing the remaining amount in mid-cap mutual funds to grow the corpus further. She further seeks advice that since he already has an adequate retirement corpus, would it make more sense to pay the tax and opt for a second alternative.

Ravi Kumar TV, Director, Gaining Ground Investment Services said that the investor should first confirm whether the Rs 16 lakh capital gains tax is correctly calculated and whether she qualifies for any available exemption.

The expert said that if saving this tax requires investing a much larger amount in another property, the property should make sense as an investment on its own.

The expert further mentioned that if you would not buy that property without the tax benefit, it may be better to simply pay the tax and keep the remaining money available for better investment opportunities.

The expert said that since her retirement needs are already well taken care of, paying the tax and investing the remaining money for long-term growth makes more sense.

The expert cautioned the investor that instead of putting the entire amount into mid-cap funds, it would be safer to spread the money across a diversified equity portfolio, with only a part going into mid-caps.

The main point is simple: do not make a large investment decision only to save Rs 16 lakh in tax. Choose the option that is likely to give better long-term returns, flexibility and peace of mind.