We sold the flat in Pune which was in both our names, me and my sister. Though it was preliminary my flat but for convenience of time and my availability in the year 1999-2000, my sister's name was added in the agreement. We sold the flat in Nov 2018. The TDS was deducted in both our names and selling agreement was signed by both. The sale amount came to our joint account with the bank. I invested the entire amount in buying another flat in Delhi. Is the capital gains tax applicable to both of us with 50% share each? My sister is a home maker and has not been filing return as her income is below the taxable limit. Can she show the 50% share as gift deed to me.
Yes she can give you her amount as gift without paying any tax on such gift transaction but first she will have to pay tax on capital gain earned if it's above 2.5 lakh.
Also you would benefit/save some tax by showing it as her income rather than showing 100% as your income.
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Thank you
Dear Sir,
Hope you are doing well !!
Ideally, the capital gain tax liability will arise on both of you.
As you have invested entire amount in new property, there will be no capital gain tax liability on your part.
However, the law does not clearly say that the new property must be bought only in the name of the seller and not on anybody else’s name. Hence, there are interpretations that Joint ownership can be acceptable but exemption can be limited to the share of ownership.
She can transfer the share in property through gift deed. It can be acceptable.
- The capital gain will be charged to tax only in your hands.
- The gift deed will not work because at the time of sale, property was in the joint name.
Yes, Capital Gain Tax is applicable on both of your in proportion to your respective share in the property.
Gifting 50% share to your won't save her tax on the capital gain, though the gift would be exempt.
Look for options available under Sec. 54/54EC to save tax on it.
I hope this answer satisfies your requirement.
Regards,
CA Hunny Badlani
Hi
Yes capital gain is applicable to both in respective sharing ratio.Since TDS is deducted in both the names so it is advisable to file return of your sister.
Hope it helps
Capital Gain will be applicable to both of you. However you can show that your sister's share in the property was only 1%. 99% belonged to you.So she will have to bear Capital gain on only 1% of the total gain, and you can claim 99% of the total gain.Now since you have re-invested the money in buying another property you can claim exemption for that cap Gain. Also you can claim your TDS back, with filing properly your Income tax Return.
Besides, the gift thing will not work in your case. She could have gifted her share in property and rescued from the capital gain before you sold the property and got TDS deducted. Once that is done, she earned her capital gain. Now even if she gift that gain to you, she have to pay tax on it. However as i said, you can show that she was only 1% of the owner of property and cover all your gain in your income Tax. Reach me on catejasyshah.gmail for assistance in filing Income Tax return.
I hope this information was helpful. Please rate it 5, and provide your valuable feedback.
Hi
Both of you can show 50% capital gains in ITR and claim exemption for reinvestment since money was received in joint account and invested back from joint account. Claim the refund of TDS.
No requirement to show gift.
We may assist you with the filing.
There is clubbing provision where though the asset is transferred to other, the income from such transferred asset is to be clubbed with the transferor.
In your case, it would be necessary to see who the actual owner of asset is. Is any income from the flat (like rent) shown in your sisters hands. Wondeirng what was the purpose to show her the part owner of property. Has she paid you anything for being part owner ? IN case you are the actual owner and paid for acquisition of that flat, the gains from sale of this flat will be taxable totally in your hand.
Merely gifting 50% now by your sister does not change any position. If she is the real owner then she also need to show part capital gains. Else show the entire gains in your hands.
Also, it would be necessary for you to maintain all the documentation to justify the position you take for tax purpose. Please maintain documents for ownership with bank entries and sale documents. IN case your ned detailed discussion, we can have a call.
