Ownership of property for income tax analysis
1) The agreement to sale of a property (agriculture land situated in urban area) is in the name of husband but the General Power Of Attorney (GPA) is in the name of his wife. Now that property is sold. In whose books the profit on sale of land should be taxable (husband or wife). The consideration at the time of purchase was given by husband. At the time of sale, the consideration was jointly received by both husband and wife.
2) On sale of the above property, both husband and wife purchased a residential property jointly. The percentage of their sharing is not mentioned on the purchase deed. Husband made 67% of payment for new property purchased and wife made remaining 33% of the total consideration. Can we assume the basis of ownership on the basis of payments made. Or should it be 50% each.
The above analysis would help us to adequately claim the benefit u/s 54F of the Income tax act 1961.
Asked 3 years ago in Income Tax from Delhi, Delhi
1. Profit shall be booked in the name of husband because agreement to sell was in his name and he paid it. Having a poa in wife's name is done in delhi earlier to take care legal issues on transfer of property on poa.
2. In absence of sharing ratio,it is always assumed equal ownership. Further, there are various court judgements where in exemption has been allowed to one spouse u/s 54 if he has paid the consideration but new property is purchased in joint name. Thus, husband can claim exemotion for his entire money paid.
CA, New Delhi
It seems the husband is having ownership of the land but is it by virtue of an agreement to sale? What about the registration? In whose name it was registered?
Assuming that the husband is the owner of the property and he executed GPA in his wife's name, apparently without any consideration. The income on the sale of the property though received by the wife also will be the income of the husband only by virtue of clubbing u/s 64, assuming that the ownership of the property has been transferred to the wife under the GPA. If the ownership is not passed on, then it will be the income of the husband only.
The joint ownership of new property can be in any proportion but the seller of the property should be the registered owner of the property to claim exemption u/s 54F, subject to the fulfillment of conditions specified therein.
1. In reply to your first question we submit that the points in the GPA Agreement holds importance.
If in GPA possession is transferred to wife then the wife is liable for Tax, but many times due to inability or other reason only signing authority is given in such case Husband is liable.
In the present case assuming that only signing authority is given to wife through GPA, Husband is liable to pay Capital Gains Tax. If the amount is received in joint name then also husband is liable.
2. For claiming benefit U/s. 54F, the property can be in joint name. Only onus is to prove that the capital gains is invested.
Here in this case -There is a capital assets considering the agricultural land is not covered in the exception clause of 2(14) . There is transfer of property as per section 2(47)(v)/(vi) .The transferor is the husband acting through his wife ( power of attorney is in the name of wife ) . The transfer is covered under section 45 and it is taxable .
Section 54F deals with the exemption from long term capital gain arising from the transfer of capital assets not being a residential house property. Assuming the capital gain arises is the long term capital gain, the assessee can claim the deduction based on the cost of the new assets and net consideration. In this case the husband has paid 67% of the net consideration , hence the husband will be taxable for shortfall of net consideration over cost .
CA, New Delhi Area, India
1. As the consideration at the time was given by husband, it will be presumed that husband was owning the property. So capital gain will be in the name of husband.
2. It will be presumed that share of both persons is 50%.