• Calculation of tax for the gift received

My parents left no will. There are 4 properties self acquired by my father. He died in 1998. Since then these properties remained undivided. We are 5 sisters and one brother. One of my sister is an advocate. After prolonged discussion till 2012 i filed for one sixth partition suit in 2012. My advocate sister raised objection and sought particular portion of property as settlement which others did not agree.In March 2015 she died and we asked the court to divide six shares amongst five. At this juncture her Junior who is advocate produced unregistered will in court which showed that in case the said dispute is not settled then he will get 50% of her share in all properties and the rest 50% to other sister who lived with her. As a compramise we sold one property and paid 50% of sale value to him in lieu that he leaves his rights on other three properties.Accordingly we compramised in lokadalat and the judge put a condition that he should execute relinquishment deed in favor of all of us.We have paid him 50% of sale value as agreed earlier.Now while executing relinquishment deed the actual market value in other three properties are more than what he recd as settlement. Since his CA told him that he will have to pay capital gains on the balance amount he refused to sign.Now another advocate suggested that his rights being relinquished be treated as gift.So on verifying we understood that the amount will add to our individual income which will be difficult for us to pay heavy tax. Since gift will be easy for him and difficult for us is there any method by which we can claim waiver from Income tax as the property under question was ancestral in the hands of my sister and he transferred it under will now. So can you help how to save huge tax?
Asked 2 months ago in Income Tax from Greater Mumbai, Maharashtra
Regarding provisions of gift if you all receive any amount in gift from a non relative and it's stamp duty value is above 50000 then you have to pay tax on such gift so first you will have to calculate whether his share which should be around 8.3333% in the land. Does this value comes above RS. 50000 if yes then there is a question of paying tax on such gift.
You must also consult with an advocate whether such unregistered will of your sister where it is mentioned that the junior will get 50% share is it a valid will.
In case it's a valid will there is no other option but to get his rights relinquished and pay the capital gain tax.
Naman Maloo
CA, Jaipur
400 Answers
2 Consultations

5.0 on 5.0

Hi,

- Junior got 50% against relinquishment of rights in property is taxable in his hands under capital gain. He is not liable to pay tax on balance amount because he got 50% against releasing his rights.

- After 50% payment he releases his share in all the three properties in the favour of five persons. You all five persons are not liable to pay any tax on the share released by him. You will be liable to pay at the time of sale of the property or any rental income.

Please take the second opinion before taking any decision.

Thanks
Vivek Kumar Arora
CA, Delhi
1534 Answers
36 Consultations

5.0 on 5.0

Hi,

The Junior will not have to pay any capital gains tax on the remaining amount since he has received only 50%. He is liable to pay taxes only on that.

As far as your tax liability is concerned, you and your siblings will not be liable to any tax arising from this transaction.

Regards,
Nikhil.
Nikhil Khanna
CA, Mumbai
1288 Answers
15 Consultations

5.0 on 5.0

Hi,

Since, it was a settlement before the Court, you can take argument that whatever share you have received is against the settlement you had with that third person. It's not a gift. 

However, if you sign the gift deed, then you have to pay tax on it.
Abhishek Dugar
CA, Mumbai
3569 Answers
158 Consultations

5.0 on 5.0

Dear Ma'am,

Hope you are doing well !

1.Junior will be liable for capital gain tax only for 50% which was received against relinquishment of rights.

2. You and your siblings are not liable to pay any tax on this transaction . 

Besides that you should consult with a lawyer for validity of that unregistered will produced by the Junior.

Thanks & Regards,
Payal Chhajed
Payal Chhajed
CA, Mumbai
865 Answers
4 Consultations

4.8 on 5.0

Hi

A proper reading of the judgement is required so as to know how the transaction is to take place. If gift deed is executed, stamp duty needs to be paid. 

Since it's done out of order of the court, the relinquishment of rights shall not be liable to capital gains.

However, this is prone to litigation. A lawyer would help you out better with this.
Lakshita Bhandari
CA, Mumbai
2123 Answers
68 Consultations

5.0 on 5.0

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