• If I gift residential land to my father, when he sells the property will it become taxable to him

I have Residential land in INDIA of worth 30 lakhs which I bought in 2010 for 3 lakhs. . I like to sell the same. I like to know best way to sell as an NRI. 

1) If I give the land as gift to my father(Indian citizen) and he sells the same immediately how much tax he needs to pay? Is the selling amount will become taxable Income to my father? If so how much tax it would be to my father including any GST etc.

2) If I give Power of Attorney to my Father and sell directly how much Tax (Including GST ) we need to pay.

3) Is there any better way to lower tax that you suggest to sell the property in India as NRI ( I am on work visa in USA since 2006)

Thank you,
Sridhar Nallagorla
Asked 15 days ago in Income Tax

1. If you gift the land to your father then you have to incur stamp duty, registration charges, legal expenses, mutation expenses etc. for transfer of the property in the name of father which may vary between Rs. 1 lacs to 2 lacs.  Sale of property by your father will also be liable to capital gain tax @20% unless exemption availed by way of investment in section 54. There is no GST applicable on your transaction.

 

2. Capital gain would be Rs.24.60 lacs and tax would be Rs.4.50 lacs.

Vivek Kumar Arora
CA, Delhi
3936 Answers
294 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

-If you gift the land to your father, any subsequent capital gain from sale of the aforesaid land shall be taxable in your father's hands. Also, you need to transfer the same through gift deed and pay applicable stamp duty and other charges.

 

In above case, there would be capital gain of Rs ~ Rs 24.60 lakh. It will be taxed at 20.8%.

 

It is calculated as below:

 

Sale consideration -Indexed COA- transfer expenses = (Rs 30 lakh- Rs 5.40 lakh)=  - Rs. 24.60 Lakh

 

The indexed COA= Rs 3 lakh /167*301= ~Rs.5.4 lakh.

 

-For claiming exemption from capital gains, investment can be done in :

  1. Residential house property under section 54F: invest in a ready to move in property within 2 years of sale or purchase land and construct a house property within 3 years of sale.
  2. Eligible bonds under section 54 EC: You can invest the capital gains of up to Rs 50 lakhs in bonds of NHAI or REC, within six months of its accrual and get the exemption u/s 54EC. Such bonds shall be redeemable after 5 years. Only interest received on such bonds shall be taxable. There would be no taxes on redemption after 5 years.

 

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.

 

We may assist you in entire procedure.

 

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

 

 

 

 

Payal Chhajed
CA, Mumbai
5010 Answers
120 Consultations

5.0 on 5.0

1. Assuming you have bought property after April 2010 your capital gain in would be approximately 25 lacs and tax on the same would be approximately 5 lacs. Yes, the amount would be taxable in your father's hand. There is no GST on sale of ready flats.

 

2. In this case also the tax amount would be same. However, it would be taxable in your hand and not in your father's hand.

 

3. you can save capital gain tax is by investing the entire sales proceeds back in another residential house property or buying some eligible tax saving bonds.

Lakshita Bhandari
CA, Mumbai
5367 Answers
440 Consultations

5.0 on 5.0

Hi,

 

The tax liability which I gave you earlier still holds good. In my earlier response, I meant that assuming you have bought the property after 1 April 2010

Lakshita Bhandari
CA, Mumbai
5367 Answers
440 Consultations

5.0 on 5.0

It will not make any difference in tax liability.

Vivek Kumar Arora
CA, Delhi
3936 Answers
294 Consultations

5.0 on 5.0

1. Yes.

2. Tax rate depends on amount and period for which it is held.

GST won't be applicable in both cases.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

We can even have a phone consultation for better discussion.

Thank you

 

Naman Maloo
CA, Jaipur
3751 Answers
43 Consultations

5.0 on 5.0

You can prepare a gift deed for or a notarized declaration stating that you are gifting this amount to your father. The gift with all not write declaration is recommendedtory and not mandatory.

However, your father should show the gift amount in his income tax return.

Lakshita Bhandari
CA, Mumbai
5367 Answers
440 Consultations

5.0 on 5.0

- As you will gift the sale consideration to your father and not the property, there will be no tax implications in the hands of your father. You will be liable to pay tax on it. After payment of tax you can use the money freely. 

- The proceeds should first credit to your NRO Account to proove the transaction genuine and then transfer to the saving account of your father. 

Vivek Kumar Arora
CA, Delhi
3936 Answers
294 Consultations

5.0 on 5.0

No,it will not make any difference even it was bought on 23rd April 2010. The tax liability will be the same.

 

-There will be no tax implication on your father. However, you will be liable to pay capital gain tax on the same.

 

-Your father needs to show the same under the head exempt income while filing ITR.

 

We may discuss the further over call.

 

Payal Chhajed
CA, Mumbai
5010 Answers
120 Consultations

5.0 on 5.0

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