• LTCG on sale of parent's property

My parents have a flat in their name in Kolkata which they are planning to sell. I want to buy a flat in Bangalore with the money we get from the sale. What should we do to save the LTCG tax in this case?  Should they gift the flat in Kolkata to me and then we sell it OR is there any other way out? If their name has to be in the deed of the new flat to save taxes should both their name have to be there or any one would do? Kindly advise.
Asked 9 days ago in Capital Gains Tax from Bangalore, Karnataka
Its a little controversial issue. The safest option would be as follows:

1. Your parents gift the kolkata house to you and then you sale the house.
2. Post that, you will buy  a new house and can claim exemption from capital gain taxes.

However, it may cost you a bit in terms of stamp duty, if applicable.

If you want to take a little aggressive position, then you can let your parents sale kolkata house and buy a new house in joint ownership with them and claim exemption from capital gain. However, the tax department may take a different view and you may have to litigate.

 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
2788 Answers
114 Consultations

5.0 on 5.0

Hi,

I think it should be okay if your parents sell the flat and then you buy a flat in joint ownership with them. Till the time you can prove that the new house was purchased useing the sale proceeds and the ownership is intact, i dont think there should be any issue.

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

5.0 on 5.0

In case of gifted property the period of holding is reckoned from the date of purchase of property by the owner who has actually acquired the property. So you can sell it without any holding period.

Your tax liability will be on the capital gains only.

Yes ideally the cheques should be in your name once the property is gifted so that you can claim the exemption later.
Regards,
Nikhil.
Nikhil Khanna
CA, Mumbai
566 Answers
3 Consultations

5.0 on 5.0

Hi,

It will be better if you have that property first transferred to you (through a gift deed) and then sell it. In this manner it will be very easy to claim exemption of the capital gains if any on sale of Kolkata property by investing them in purchase of another property at bangalore. 

You may claim exemption as per section 54 of ITA in this case by investing the full capital gains in the new property to take the maximum exemption.

Even if you want to have their names in the new property then also you may be able to take the exemption but it will be hassle full. If you are the sole inhetiter then the former option should be the way forward.

Thanks
Damini
Damini Agarwal
CA, Bengaluru
138 Answers
8 Consultations

5.0 on 5.0

Hi,

1. You can sell the property immediately without any holding period.

2. Your tax liability will be on the capital gains only.

3. Ideally all the payments should be received by you post gifting the property.
Abhishek Dugar
CA, Mumbai
2788 Answers
114 Consultations

5.0 on 5.0

Dear Sir,

It is better to take Kolkata home in gift from parents as there would be less complications and low cost involved. In case of transfer as gift, you just need to pay stamp duty and registration fees as per West Bengal Act which you can claim as cost for the house purchased. Also draft the gift deed on stamp paper and get it notarised. 

There is no waiting period after taking it as gift. Cost will be cost to the previous owner i.e. your parents and period of holding would be also of previous owner. Tax will be on the gain and not on the sale part. 
Vivek Kumar Arora
CA, Delhi
695 Answers
7 Consultations

5.0 on 5.0

If your father gift the flat then no tax liabilty will arise.both of you will not be liable to pay any tax.
Just get a gift deed documented for the same.
Then you can sale the flat and invest in another property to save capital gain tax.
As per my view ,no such holding /wating period is there.
Swati Agrawal
CA, Indore
245 Answers

5.0 on 5.0

Hi

Your parents can sell the old property and make the investment in your name in another house property. As long as the amount of capital gains are invested in the new property, there would be no capital gain tax liability.
Lakshita Bhandari
CA, Mumbai
1297 Answers
36 Consultations

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