• Gift property

There was one property in Mumbai and it was in the name of my brother and sister-in -law and they sold the flat last week. They want to buy flat in the name of my brother, sister-in-law and myself and after 6 mths they will gift to me completely. So in this case capital gains on sale will be applicable and need to pay capital gain tax.

Thanks
Asked 6 years ago in Capital Gains Tax

Dear Sir,

The entire capital gain will be exempt from tax provided it has been invested completely in the purchase of new residential house property. Time limit to purchase new residential house property is 2 years from the date of sale of residential house property. If you would be unable to purchase it till the date of filing of ITR, please deposit the amount in Capital gain deposit scheme account with banks otherwise your entire capital gain would be taxable. Utilize the capital gain for purchase of residential house property.

At the time of gift also it would be exempt from tax as it is a gift to relative provided you maintained all the documents properly with yourself and complied with all formalities of transfer of house property.

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

Hi

If the amount of capital gains in invested in another residential house property, it will be tax exempt provided the owner doesn't have more than one house property (excluding the one on question).

They can directly invest in your name. There's no need to first invest in co-ownership and then transfer.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

Assuming both the properties are residential properties, your brother in law and sister in law will be eligible for claiming deduction u/s 54.

They need not to pay capital gain tax if they invest entire capital gain amount in the new property within 2 years. They will have to file return of income and show this transaction.

However, they cannot transfer the property upto 3 years from the date of buying the property.

Please feel free to call/ revert in case you need more clarity.

Thanks and regards

Abhishek Dugar

CA CS B.com

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

They can buy property directly in your name and capital gain would be exempt to the extent it is invested.

In case you go by the other route as mentioned by you, you will have to register property once again and this will double the registration costs I.e. payment of stamp duty etc.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

There will be no capital gains if the entire capital gains is reinvested to buy a new residential house.

Also if it is gifted to you, again there will be no taxes as gifts to blood relations is exempt from tax.

Hope that clarifies.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

The safe option is to buy the property in joint name and then gift it to you. This may result in higher expenses on account of registration of property twice but this will be a clean transaction and there will be no incidence of capital gains taxation.

Hope that clarifies.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Dear Sir,

If they will purchase property directly in your name, Capital gain would be levied in their hands. First they have to purchase property in their names and then transfer it to you.

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

Hi,

In case your elder brother and sister-in-law sell the property existing in their name and re-invests the same in another property, that too in their name, they will be exempt from the Capital Gains Tax. (Sec 54)

Post acquisition of such another property, they may gift the same to you and that will be exempt from tax. (Sec. 56)

Regards,

Sunny Thakral
CA, Delhi
224 Answers
8 Consultations

5.0 on 5.0

Hi,

They can buy a house jointly with you and claim the exemption of capital gain.

However, please note that there may be registration / stamp duty payable on the gift of property to you, whenever it is done. This varies with each state, hence, please check as per the state law.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LL.B

Keerthiga Padmanabhan
CA, Greater Mumbai
784 Answers
27 Consultations

5.0 on 5.0

Hi,

If they buy a property anywhere in India within 2 Years from the date of Sale of the old Property is exempt from Capital Gains Tax either fully or partially based on the provisions of Section 54 of the Income Tax Act. If they invest entire Capital Gains in new House, then whole Capital Gains will be exempt. If a proportion of the same is invested, then the Capital Gains will be exempt proportionally. If the amount is not invested in new Property before the Due date of filing IT Returns, then the Capital Gains not utilized shall be deposited in Capital Gains Accounts Scheme.

As per the provisions of Benami Transactions Act, if the amount for a property is paid by your Brother, then it will be treated as a Benami Transaction unless your brother is a Co-owner. So, either Your brother and sister-in-law can buy Property in Hyderabad jointly with you, or buy only in your brother's name and later gift it entirely to you by paying requisite Stamp Duty as per Telangana Stamp Act (Note: Your sister-in-law may not be allowed to gift directly to you. Check with a Local Advocate in this regard)

Pradeep Bhat
CA, Bengaluru
542 Answers
94 Consultations

5.0 on 5.0

Hello,

In case the intention is to gift you the property of the same value, then they may gift you the mumbai property itself, which you can later on sell and buy a property in Hyderabad.

If they proceeds are not entirely transferred to you, then you may buy a property jointly and they can gift/ withdraw from it only after 3 years from the date of purchase.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, FCA, LLB, CERT. FAFP

Rohit R Sharma
CA, Mumbai
2104 Answers
95 Consultations

5.0 on 5.0

To save capital gain tax ,you have to invest in other residential property but to claim the benefit of the same ,one have to hold new property for 3 yrs again,so new house cannot be gifted till date.Further when you go for gift,registration cost will be there.so any how ,one way is to be borne ...if capital gain is saved then heavy registration cost will be there or vise versa.

It is advisable to consult advocate ,get the working done with figures and see the which way you saved the most and decide accordingly.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

According to benami transactions act, "benami transaction" means,—

(A) a transaction or an arrangement—

(a) where a property is transferred to, or is held by, a person,

and the consideration for such property has been provided, or paid

by, another person; and

(b) the property is held for the immediate or future benefit,

direct or indirect, of the person who has provided the consideration,

However point (b) would not apply in your case, but it may be questionable and may be proved against you. So it is better to get a joint ownership and then gift it to you and get the registration done again.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

Exemption under section 54 can be claimed if person earning capital gain has invested amount of caputal gain for construction of new house property or buy new house property.

In your case property has to be purchased in name of your brother bhabhi and your joint name or by your brother.

Further under section 54 two residential property can be purchased i.e. if you own already one house another house can be purchased and there are many judgments are there.

Furthermore if your brother gift you anything it will fall under gift from relatives as per income tax act and hence no any tax is required to be paid.

For further consultation kindly contact .

Vikas Jain
CA, Ahmedabad
18 Answers

Not rated

Dear Sir,

Yes your brother will have to pay tax on sale of flat. For the purpose of tax saving your brother can invest the amount in the bonds of NHAI ,& RECL upto RS 50,00,000 within 6 months of sale of flat. to be save from paying of tax by your brother.

But when he transfer the property to you as a gift NO tax liability would be arises since it is a gift for you .

Thanks

Shiv Kumar Agarwal
CA, Delhi
489 Answers
74 Consultations

5.0 on 5.0

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