Tax implication

Since the property is currently in your mothers name and since she is alive the capital gain from this property would be taxed in your mother's name and therefore she is the one who needs to make investment in her name. She can invest in only one house.

Since the property is a residential house and therefore is she purchase another house or bonds she needs to just invest capital gain amount and she can gift the remaining amount to her 3 children.

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Hi

Since your mother is the legal owner of the house property to be sold, capital gains shall be taxable to your mother only.

If four of you want to buy property in individual names, the property in name of your mother has to be first divided between for of you by way of a gift deed or release deed. Once all four of you are co-owners of this property, capital gains shall be divided between four of you and re-investments can be made in individual names then to claim capital gain exemption.

In case of sale of a residential house, only the capital gain amount need to be reinvested to claim capital gain exemption and not the entire sales consideration.

Hello,

Currently, the property under question is in the name of your mother, therefore, she would be liable for the capital gain and to make the investment in residential property for exemption.

Alternatively, your mother can transfer the share in the property to her children through the gift/release deed. This way, the children can also be made the owner of the property, and dividing the capital gain would be possible.

I hope this answer satisfies your requirements.

Regards,

CA Hunny Badlani

If the sold property is a house property, then for exemption u/s. 54(Investment in another house property) or 54EC(Investment in CG bonds), the capital gain amount is only required to be invested.

Capital Gain will be sale proceeds minus indexed cost of acquisition. You need to get the property valued as on 1st April 2000 to apply indexation. For Capital gain exemption the property will have to be in mother's name. 

The Capital Gain is required to be invested in house or bonds and not the entire proceeds.

- Capital gain from sale of property would be taxable in the hands of each co-owners in equal ratio. Obtain valuation report from the govt.approved valuer as on 2001 and apply indexation on such value till the date of sale. From the total sale consideration, deduct the brokerage expenses to get net sale consideration.

- LTCG would be Net sale consideration minus Indexed COA.

- To claim exemption you all can invest separately either in the house property or bonds.Time limit to purchase the property is 2 years from the date of transfer and in case of construction it is 3 years. In case of bonds, maximum limit for investment is Rs.50 lacs and within six months. If the amount is not re-invested till the date of filing of ITR for the previous year in which the property was sold, you have to deposit the capital gain amount in capital gain account scheme to claim exemption.

- You all can also invest in single property and become co-owners of the property and after your mother, her share will be divided among three.

- To reduce tax liability, in all cases you need to re-invest the capital gain amount.

At thus moment you are planning to sell the property where the owner is mother.  So, the capital gains would be calculated in her hands.  She can get capital gains exemption only on her investments.  You can co-own that property, she being the principal owner.  But capital gains exemption would be available on the investment made by her. 

She can share proceeds to you all only after payments of capital gains as gift which will not be taxable for kids.  Since, the kids have not made any gains the questions of claiming exemption on the property owned by them does not arise.   

Dear Sir,

Hope you are doing well !!

Your mother will be liable for capital gain taxes.

It is advisable that first transfer the property through gift deed and tax the benefit of co- ownership.

Please note that in order to claim exemption, you need to invest the capital gain amount if a house property is sold. However, in case of sale of a land, entire sales consideration needs to be invested.