• Income Tax on Gift deed

Residential plot was transferred to me through registered gift deed by my Maternal Aunt (Masi) in November 2020. Plot had been originally purchased by her in the year 1997 for Rs.1 lakh. Present ready reckoner value of the plot is Rs.33 Lakhs. 

A) Whether any income tax will be applicable to me in AY 2021-22 because of this gift deed. 

B) How much capital gain will apply if the plot is sold by me in this assessment year at reckoner value.
Asked 1 month ago in Income Tax

Dear Sir, gift from relatives is exempt under the Income-tax Act and Maternal Aunt ("brother or sister of either of the parents of the individual") falls within the definition of a "relative". Thus, the gift is exempt in your hands and no tax is payable.

 

Calculation of capital gain on sale of plot:

The plot shall be deemed to be a long term capital asset since the period of holding of previous owner is also to be included (in case of gift, will etc.). In case of long term capital asset, indexation benefit is allowed while calculating cost of acquisition. Thus, the calculation would be as under:

 

A. Sale consideration: Rs. 33,00,000

B. Less: Indexed Cost of acquisition: - Rs. 6,02,000

(Indexed cost of acquisiton = Fair market value of property as on 01.04.2001*301/100)

(Assuming that the fair market value of property on 01.04.2001 would be Rs. 2,00,000 (a valuation report would be required from a valuer to calculate correct value as on 01.04.2001. Otherwise, the assessee can also consider the original cost of acquisition, that is, Rs. 1,00,000, whichever is more beneficial to the assessee)

C. Long Term Capital Gain (A - B) = Rs. 26,98,000

 

On Long term capital gain, tax is payable at 20% (Plus, surcharge and cess as per the applicable slab in which you are falling). Thus, tax would be around Rs. 5.39 lakhs (plus surcharge and cess).

 

Hope it would be helpful. Thanks!

Yogesh Malpani
CA, Mumbai
49 Answers
6 Consultations

5.0 on 5.0

Normally, there is no income when a gift is made unless it is covered under Section 56 of the Income Tax Act.  If you received the gift from your mother's sister, as mentioned by you, it is not considered as income in your hands. 

Hence, there is no income in your hands in the AY 2021-22 because of this gift deed. 

When you sell the plot, the cost of acquisition will be the cost of acquisition in the hands of your the donor.  As the property was purchased by her in the year 1997, the cost of acquisition will be the market value of such property as on 1st April 2001. You need to get market value of such property such property while selling. The indexation will then be applied on such market value. For instance, if the market value of the property as on 1st April 2001 was say, Rs 2 Lakhs, the indexed value of such property will be Rs 6,02,000/- if the sale is made during the current financial year ending on 31st March 2021.  Assuming that your sale consideration as per the registered sale deed is Rs 33 Lakhs, as per the ready reckoner value mentioned by you, your long term capital gains will be about Rs. 27 Lakhs. 

B Vijaya Kumar
CA, Hyderabad
921 Answers
83 Consultations

5.0 on 5.0

Hi

 

A. Your maternal aunt is covered under the definition of relative as per section 56 of the Income Tax Act. Hence such gift shall not be taxable to you. Report it as exempt income in your ITR.

 

B. For calculating capital gain, you need to first obtain the value of the property as on 1-4-01. Such cost shall be indexed and would be available as deduction from the sales consideration. Supposing the value is 1.5 lacs, capital gains would be ~ 28.5 lacs.

 

Capital gains are chargeable to Tax at the rate 30%.

 

You may invest in another residential house property or section 54ec eligible bonds to claim capital gain exemption.

Lakshita Bhandari
CA, Mumbai
5367 Answers
440 Consultations

5.0 on 5.0

Hello,

 

Such a gift of property from a relative as per the income tax law would be exempt for you. Brother or sister of either of the parents is covered under the definition of the relative under the income tax law.

In case you sell the gifted property, the cost of acquisition and the period of holding of the previous owner(doner) would be considered for the purpose of calculation of the LTCG. Since the property was acquired before 1st April 2001, the FMV as on 1st April 2001 would be considered the cost of acquisition of the property for you then would be indexed till the year of sale of the property for the indexed cost of acquisition. The net figure of the indexed cost and the sale consideration would be your Long Term Capital Gain taxable at 20% plus cess as applicable.

I hope this answer satisfies your requirements. 

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Madhya Pradesh
2540 Answers
8 Consultations

5.0 on 5.0

You can do so, provided its the same person who is selling and buying. 

B Vijaya Kumar
CA, Hyderabad
921 Answers
83 Consultations

5.0 on 5.0

No tax on gift from relative.

You need find the value of plot on 01.04.2001 to calculate capital gain.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement. You can even book phone consultation for further personal assistance.

Thank you.

Naman Maloo
CA, Jaipur
3751 Answers
43 Consultations

5.0 on 5.0

Yes

You may utilize funds from sale of both properties to invest in a single residential house property to claim capital gain exemption.

 

Lakshita Bhandari
CA, Mumbai
5367 Answers
440 Consultations

5.0 on 5.0

- Gift of residential plot by your Masi to you will not be treated as income in your hands. As the property was purchased by your Masi before 01.04.2001, obtain valuation report of the property as on 01.04.2001

 

- Yes you can claim the benefit of capital gain from sale of two properties by investment into single property.

Vivek Kumar Arora
CA, Delhi
3936 Answers
294 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

1.No, income tax is not applicable on the same.

Its gift money and exempt u/s 56 of the income tax act.

You can show the same under the head exempt income while filing ITR.

 

2.As the date of acquisition falls prior to 1 April 2001, you have a choice to consider the Fair Market Value (FMV) of the property as on 1 April 2001 as your acquisition cost. 

 

It is advisable to get the FMV/ valuation of the Property as on 01.04.2001 done from the registered valuer.

 

Government-approved valuers follow a standard process for the valuation and provide a detailed report.

 

Assumptions of any type for consideration of value shall not be entertained by the income tax department. In case of any enquiry, the department will consider the value stated in the valuation report from a registered valuer,"

                               

The capital gain will be taxed at 20.8%. You can save tax by investing the sale amount in a new house or purchasing 54EC capital gain bonds. 

               

For further discussion and clarification you can avail phone consultation on tax full.

Payal Chhajed
CA, Mumbai
5010 Answers
120 Consultations

5.0 on 5.0

Yes, you will get the exemption for the same.

Payal Chhajed
CA, Mumbai
5010 Answers
120 Consultations

5.0 on 5.0

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