• Sell of land plots

My mother and her 9 siblings have each inherited pieces of a single big plot which was earlier in my grand mother's name. These pieces are separate but adjoining. This inheritance happened by way of a partition deed (not registered) after my grandmother's death. Now my mother and her two siblings are planning to sell their parts to a single purchaser.

1. Seller wants to make a single registered deed. Is it fine to make a single deed?

2. My mother has planned to put the entire proceeds in NHAI bonds to avoid LTCG Tax. In case of single deed, since ADSR valuation (MV) may include the total value for all 3 parts together, how to ensure separate demarcation of the Tax liabilities. To make it clear, IT dept. fetch which value to determine the tax liability and where will this data be entered in Registrar office?. I feel there must be bifurcation of the total amount which each is receiving so that each faces individual tax liability. How to ensure this in all documentation?

3. My mother's siblings are contemplating on options of getting higher return by investing the proceeds. For them, what may be the alternative options to invest other than 54EC Bonds and property purchase?

4. What are the legal modes to receive the proceeds from seller? I fear cheque may return, so in that case is A/c payee DD legal? Which Law section stipulate the acceptable modes of transaction in this case? Does DD carry the name of the seller compulsorily as this is what i want to keep transaction trail clear and clean? My mother has an outstation account so what kind of cheque/DD must she accept?
Asked 12 days ago in Capital Gains Tax from Bankura, West Bengal

I don't think that would be possible as there are 3 different properties registered in 3 different people's name.

In the deed the seller will mention the cheque amount paid to each buyer and the TDS he will deduct.

Currently there are only two options available with them either invest in bonds or purchase a flat if they want to earn higher return pay the tax and invest elsewhere.

Yes account payee bank draft can work or electronic transfer. Yes in DD you have to mention in whose favour you are making this DD. Account payee cheque or DD would do.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
1363 Answers
16 Consultations

5.0 on 5.0

Hello

 

1. It doesn't look possible to make a single registered deed after the partition deed.

2. The total sale proceeds would be divided into 3 of you proportionately according to each person's share and tax liability of each of you would be computed accordingly. In the deed, the share of each of you would be mentioned and payment method and amount would also be mentioned.

3. To get capital gain exemption and save tax on it, you have two options either purchase/construct a residential property or invest in 54EC NHAI or REC Bonds. Further to get higher returns, you can invest the sale proceeds elsewhere but then you might have to pay a higher tax on the capital gain.

4. Yes, Account payee DD would suffice the requirement. Yes, it carries the name of the seller.

 

I hope this answer satisfies your requirement.

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Neemuch
133 Answers
1 Consultation

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

1. No, It is not advisable to make a single registered deed.

 

2. If the property is sold, each co-owner has to offer the capital gain as applicable on his share.

 

It may be noted that the apportionment shall be made at the ‘sale consideration’ and ‘cost of acquisition’ level and not at the ‘net taxable capital gains’ level.

 

So, in the case of long-term capital gains on sale of the jointly owned property, whether commercial or residential, each one of the co-owner shall be entitled to claim exemption under Section 54EC, by investing the indexed capital gains up to Rs 50 lakhs. So, the limit up to which investment in specified bonds can be made under Section 54EC, will be applicable in case of each co-owner and not for the property as a whole.

 

3.There is no other alternative ways other than 54EC Bonds and property purchase.

They need to invest long term capital gain in the below options.

 

a) Purchase of new residential house property within 2 years or construct within 3 years from the date of transfer.

 

b) Invest in to specified bonds as specified under section 54EC within 6 months from the date of transfer.

 

4.Yes, it is sufficient.

Payal Chhajed
CA, Mumbai
2069 Answers
17 Consultations

5.0 on 5.0

You can make a single deed with specifying the share of each owner in the deed.  The deed can be made between all the sellers and the purchaser.  To ease on the taxability, you can specify the bank account details of each seller and their portion such that the buyer would remit only the respective share to the individual owners bank account. 

As regards, the MV of the land, ideally alongwith the composite value, take separate valuations for each part.  If there is not much of a difference, you may divide the total MV into the share of inheritance.  For taxability, the IT Department will take the higher of MV or the sell price. Your mother needs to invest only the capital gains for tax exemption and not entire sales proceeds.

 

In case your mothers siblings are not interested in capital gains exemption, then there are several modes to earn income.  They can invest in shares or mutual funds.

 

Ideally, you should receive the part payemnst before execution of transfer.  Else, demand draft is the most suitable mode. 

Jasmina Jain Shah
CA, Greater Mumbai
250 Answers
3 Consultations

5.0 on 5.0

1. Single deed is fine for tax perspective but you will have to properly show each member's share in deed very clearly.

 

2. Since the stamp duty value will be based on per sq.ft, you can demarcate the separate value for each property and mention in the deed.

 

3. Other than bonds, they can invest in another residential house property to save taxes.

 

4. Account payee deed is a good option. You can confirm other things from banker.

Lakshita Bhandari
CA, Mumbai
2945 Answers
131 Consultations

5.0 on 5.0

Hi,

 

- As the 9 siblings are the owner of single plot through partition deed which was in the grandmothers name. Execute the transaction on the single deed specifying the share of each of the three siblings.

 

- Yes, mention the share of each of the three siblings for easy and proper calculation of Income tax liability.

 

- For Income tax exemption, only two options are available as you have said otherwise there are multiple alternatives in which you would not get capital gain exemption.

 

- Account payee DD is the best option.

 

Thanks

Vivek Kumar Arora
CA, Delhi
2412 Answers
105 Consultations

5.0 on 5.0

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