• My father sell a residential plot

My father has a residential plot and he sell it for profit. Its a long term capital gain.I want to avoid tax on profit. My questions are as follows:
1. Can he buy capital gain bond(54EC) in my name? If yes, Can I sell it after 3 years and got the tax exempt money. I understand, I need to pay tax on interest on these bonds.
2. Can he directly give me capital gain amount as gift? Will my father still need to pay tax on capital gain? I believe gifts from parents is fully tax exempt.

Please suggest.
Monika Gupta
Asked 3 years ago in Capital Gains Tax from Moradabad, Uttar Pradesh
To avail exemption under section 54EC the bonds must be purchased in the name of person claiming exemption for long term capital gains. However the bonds can be purchased in the joint names of your father and yourself, your father is first applicant/holder and claim exemption u/s 54EC.The bonds will be redeemed  at the end of three years and tax free. On such redemption your father can gift the money to you which is tax free gift. However interest on bonds is taxable as income under income tax act in the year of accrual.

He can give capital gains as tax free gift, but he will have to pay capital gain tax on the long term gains derived by him.  It is true that gift by parents are tax free.
Vijay N. Kale
CA, Hyderabad
248 Answers
12 Consultations

4.9 on 5.0

Yes Monika your father can purchase the bonds either in joint name or in his personal name. But
Exemption in case bonds purchased in joint name: Where the investment in bonds for claiming exemption was made in joint name it was held that there was no requirement in the section that the investment should be in the name of the assessee. The object of insertion of section 54EC was to give an incentive to the development of infrastructure.  it would not matter whether the investment was made in the name of the assessee exclusively or in the joint names of the assessee and somebody else. The only condition was that the funds used for the investment must be traceable to the sale proceeds of the capital asset. That condition was satisfied by assessee. In the case of  ITO vs Saraswati Ramanathan (2008) 300 ITR (AT) 410 (Del.)The CIT(A) had found that the son did not contribute anything to the investment and this finding was not in dispute. The consequences that flow from including the son’s name as a joint name were not relevant for the purpose of granting exemption u/s 54EC to the assessee. The CIT(A) had noted that the Assessee was 69 years of age at the relavant time and it was only a matter of convinience and to avoid any problem in future that the sons name was included. 

After 3 years he can get exemption on withdrawl i.e. there will not be any tax. Also you need to pay interest on these Bond.

After 3 years i.e. withdrawl from the Bonds he can gift it to you. After 3 years he need not pay any tax.

But before 3 years if he want to gift the amount to you then he need to pay capital gains tax and gift it to you. 
Shyam Sunder Modani
CA, Hyderabad
1408 Answers
95 Consultations

5.0 on 5.0

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