Transfer of sales proceeds and capital gains account

Transfer of sales proceeds and capital gains account

Our ancestral property was in my uncles name for some reason ( I have share in the property and is not disputed by my uncle). The property has recently been sold and the sale deed was also executed by my uncle and the sale proceeds are now with my uncle. I need to know the below

1) What is the method by which i can get my share of the sales proceeds. My uncle is ready for the transfer, but need to know the procedure by which this can be done minimizing the tax implications.

2) We plan to build a house from my share of the money and plan to open a capital gains account to save on tax. can this be done? ( i have heard that the capital gain account can be opened in the name of the person who has executed the sales deed. Is this true?) If yes, what is the way out.

Help on the matter is requested.

Asked 8 years ago in Capital Gains Tax

Dear Sir,

The taxability arises on the sale of property and not on transfer of sale consideration. The moment your uncle sold the property, you have become liable to pay capital gain tax on your part of share. Now, it is immaterial whether you receive the money by cash or by cheque.

However, if you plan to buy a new house, you can deposit the capital gain amount in capital gain account scheme and use this amount within 2 years from the date of sale to buy a residential property. If you want to construct a property you can do so within 3 years.

For the purpose of account opening issues you can contact bank personnel.

Thanks and Regards,

CA Abhishek Dugar

Abhishek Dugar

CA, Mumbai

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Dear Sir,

Based on the facts presented by you it appears to me that the property was in the sole name of your uncle and you were not the joint owner. (correct me if I am wrong)

If that is the case then your uncle will be liable for Long Term Capital Gain Tax as soon as he has sold the property. In order to save up on tax he has to open a Capital Gain Account Scheme and yes it has to be in his name and not yours. He can either buy a new House Property with that money and then Gift it to you. If you fall under the definition of relative then you may only have to bear the registration charges and no income tax but incase you dont fall under the definition then you may have to pay both.

In the case of Capital gains a lot of details and understanding of the case is required to help guide a way in order to minimise taxes.

Trust this clarifies your query.

Feel free to get back/ call back for any further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB - GEN, CERT. FAFP