Purchase of property by father in son's name

Dear Sir,

Hope you are doing well !!

-There would be no tax liability on you for purchase of property.

-However, your father will be required to pay the capital gain taxes on sales.

-Amount of capital gain would depend upon sale price, sale date, purchase price and purchase date etc.

-When an individual sells a property and buys another residential property, he will be eligible for exemption under Section 54/54F subject to conditions.

It is advisable to take a phone consultation for detailed discussion.

No, he will not be required to pay any capital gain taxes provided the new property was purchased 

one year before the sale or two years after the sale.

In case it is under construction, the new property should be ready within three years of the old property’s sale.

-Yes, it is advisable to prepare a gift deed for the same.

It would have been better if your father would have mentioned his name as co owner to claim exemption under 54.

Now also he can claim exemption but subject to litigation.

His capital gain would be exempt.

What kind of property was sold and purchased?

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Thank you.

Since the payment has been made directly and registered in your name there will as such be no requirement, but it would be better if you prepare a gift deed mentioning the total amount with cheque number as gift to you if in future source of such purchase is asked.

Hello,

Assuming the new property, in which investment has been made, is a house property, to claim an exemption under either Sec. 54/54F.

There would be no tax liability since full exemption would be available.

I hope that this answer satisfies your requirements.

Regards,

CA Hunny Badlani

No, for investing more than the receipts from the sale of the old property, there would be no tax liability.

You can make a gift deed for future reference if needed any.

Dear Sir,

Here is my reply to your query:

The case you mentioned is a debatable issue but there are some case in which the ITAT had allowed the deduction in case the amount is invested in the name of the other person than the seller of the property.

Here is a case in which the exemption is allowed:

Shri Rajkumar Mandhani Vs DCIT (ITAT Hyderabad)

Here is the link https://taxguru.in/income-tax/section-54f-exemption-eligible-property-purchased-wifes-name.html

Also, as the amount invested is more than the amount of sale proceeds so there will be no capital gain tax in the hands of your father.

Also, you can create a gift deed stating that you have received the gift from your father. Gift deed should be created on a stamp paper of Rs. 100.

Thanks and Regards 

Divya Chugh 

Hi,

Ideally, in order to get the exemption from capital gain tax, your father should have bought the property in his name. However, there are various judicial precedents wherein the courts have allowed the exemption even if the property has been bought in relative's name.

Please note that the new property should be residential house/flat (NOT A LAND).