• Capital gains tax on joint property

Recently I disposed a flat of which my brother and I were joint owners. Since we were joint owners, the amount given by the buyer was split in 2 cheques in each one of our names.  
However, since my brother was only a student when we bought the house and since it was me who repaid the house loan, my brother transferred the entire amount that was given to him to my bank acct. 

Now my query is :
How does my brother escape paying the CG Tax ?

Or should I open a joint CG Acct with my bro to save him from paying taxes unnecessarily ?8

I am in the process of making part payments for a new house. If it is unavoidable that I have to open a joint CG Acct with my bro, can I use the money from the CG Acct to make part payments for this new house (of which he's not going to be a part owner) ?
 Would be grateful for some clarity on the issue.
Thanks & regards
Asked 14 days ago in Capital Gains Tax from Chennai, Tamil Nadu
Hi,

The money so received from sale of flat will have to be divided in 2 parts, one for you and the other for your brother. Unfortunately, in this transaction, he cannot avoid taxation. He will have to pay whatever taxes come in his hands and file a tax return. You are advised to transfer the amount of taxes leviable on him on account of such capital gains given that you have received full payment from the sale. 

CG account is opened for saving capital gains tax by investing in a new house u/s 54, of ITA. Since you are purchasing the new house, i assume you have taken care of this fact and you are saving the capital gains tax. In order to save the capital gains in your brother's hands, his name must continue as a joint owner in the new property and naturally his name would have to be included in the CG account as well.

If he cannot be an owner in the new house, then he cannot avail that exemption of CG tax and hence you will be advised to remit him the amount of CG tax so that he can pay that.

Thanks
Damini
Damini Agarwal
CA, Bengaluru
138 Answers
8 Consultations

5.0 on 5.0

Hi,

You can open a joint CG account to ensure that the tax on your brother's share is saved. But that would mean  that the new property has to also be in the joint name to save taxes.

In future, your brother can gift you his share in the flat so that you become the sole owner of the flat.

Regards,
Nikhil.
Nikhil Khanna
CA, Mumbai
566 Answers
3 Consultations

5.0 on 5.0

Your brother will be liable to capital gain tax. To save the tax, your brother as an individual needs to re-invest in the new house property from his account only. If reinvestment is not made before filing of ITR then your brother need to open CGAS to park the funds.

You both as an individual are liable to Capital gain tax.
Vivek Kumar Arora
CA, Delhi
695 Answers
7 Consultations

5.0 on 5.0

Hello,

If you want to use the proceeds to make payment for a new house, then you will have to include his name in the house as well.

Unless his name is there, he cannot escape paying taxes.

The other option you invest the money in Capital Gain tax saving bond in his name which has a lock in period of 5 years, after the bond matures after 5 years then you can ask him to gift/ transfer the funds to you.

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
2089 Answers
90 Consultations

5.0 on 5.0

Ask a Chartered Accountant

Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
  Ask a CA