Capital gains on registering a property sold in 1987
My Grandfather purchased a property in 1987 and paid full consideration. However, the property was not registered. We have the Agreement to sell from the seller along with the Power of Attorney in my father's name.
We have constructed 3 additional floors on the same property.
What is the best way to register the property in my father's name now ?
a). Through Agreement to Sell ( which I believe will carry Stamp Duty as per prevailing circle rates)
b). Through Will.( which may not have stamp duty implication)
Also, if we register through Agreement to Sell, will the seller have any Capital Gains tax liability since the Registered Value of the property at prevailing Circle rates is substantially high despite the fact there is no exchange of money now or no fresh income to the seller now ?
The seller's heirs are not ready to transfer stating that they will have Income tax liability.
Can we register each floor separately to avoid/reduce the tax implications ?
Request you to please provide your expert advise.
Asked 3 years ago in Capital Gains Tax from Delhi, Delhi
Based on the agreement of sale dated 1987 and based on power of attorney, you may register the property in the name of your father or any family member desirable. There is no liability for capital gains tax, kindly execute a conveyance deed giving a reference to agreement of sale and power of attorney. If you get a notice from the income tax department, kindly explain the nature of transaction by producing the above documents and reference mentioned in the conveyance deed.
Your grandfather is an owner of the property, as an agreementholder in due course. What you are registering now is unexecuted portion agreement of sale and as per income tax act the transfer is complete on taking possession of the property by paying full consideration and taking agreement of sale and Power of attorney. What you are registering is incomplete part of agreement under transfer of property act and not a transfer under Income tax act and hence there is no capital gains.
The property was transferred to your father as per Income Tax Act when he paid full consideration and the PoA was given in his favour. The seller ought to have offered the profit on sale of such property at that time itself.
Now your father can get the property registered in his name as per the Agreement to Sell.
The seller has no additional tax liability on registration now. As he ought to have offered the capital gains in 1987 itself, after receiving the full consideration. As he did not do so, it is income escaping assessment and hence assessment may be re-opened u/s 147/148. However, the proceedings u/s 147/148 are now time barred.
If the PoA is irrevocable and all the rights were passed on to your father, then the transfer would have been complete in 1987 itself. Otherwise, there will be capital gains now on registration. So the PoA is an important document that determines the tax liability now or then.
I have already answered the said question and you can have a reading of the same. In this question you are asking that whether we can register each floor separately. It does not make any difference as regards seller is concerned. They have to pay tax.
Only they can reduce the tax if they show that the construction is being done by them thereby increasing their cost and reducing profit. This we are only suggesting as you will be charged circle rates based on land and construction also.
This also depends upon your previous submissions and cannot be preferred.