• Sale of family heirloom

Hi, 

My dad owns some family heirlooms which are expected to sell this month. He wants to transfer a portion directly from buyer to my account - would there be any issue while i file my tax returns if this is done. Or is it advisable for him to take the money into his account and then transfer to my account. What would be the tax liability in this case for him and me? 

a. If buyer transfers the money into my account directly - how do i document how i got this money?
b. If buyer transfers to my dad's account and then he transfers to mine - what is the tax liability for either of us?
c. Since both of us don't own a house, can we buy a house and take tax exemption for that amount?

Thank you in advance.. 

regards

Ajay
Asked 7 years ago in Income Tax

Dear Sir,

- If directly transfer than also it amounts to Gift from father and accordingly disclosure shall be required

a) The document should be gift from your father

b) No effect only the trail of transaction is clearly visible

c) No buying a house cant save you from tax implications

Vishrut Rajesh Shah
CA, Ahmedabad
928 Answers
38 Consultations

5.0 on 5.0

In case of your dad as seller capital gain shall be taxable in his hands and in your case gift shall be treated as exempt income

You need to execute a gift deed and fund transfer entry should be through cheque only.

Vishrut Rajesh Shah
CA, Ahmedabad
928 Answers
38 Consultations

5.0 on 5.0

Hi,

As you father has owned the property from inheritance. He is liable to pay the capital gain tax, if any arises on sale of property.

It is advisable that he should get the money transferred in his account (you can be the joint owner of that account).

and after investing the money in capital exemptions scheme under section 54. or paying taxes, he can gift the remaining money to you through gift deed.

you can get the gift deed done on plain paper and have to show the amount received under exempt income while filing the return.

Yes, he can invest the money to buy a house. House can be purchased in joint ownership with your name as first or second holder.

The exemption under this section is only available to persons that satisfy the following conditions:

An individual or Hindu Undivided Family (HUF) that legally maintains ownership of the house property;

The house property is used only for residential purposes;

The house property is a long term capital asset, and was not transferred or sold within the first three years after the initial date of purchase or construction.

To claim the exemption, one must invest the proceeds derived from the sale of the house property into another residential house either within two years from the date of the sale or one year prior to sale, or one must invest in the construction of a new house within three years of the sale.

The exemption amount will be:

Equal to the amount of the capital gains if the cost of the new house property is greater than the capital gains; or

Equal to the cost of the new house property if the cost is less than the capital gains.

Meanwhile you can park your capital gain (full amount or utilized amount) in CGAS (Capital Gain Account Scheme)

This is only a stop-gap arrangement, as the funds have to be used to buy or build a house within the period specified.

The deposited money can be used only to buy or construct a residential house within the prescribed time frame.

If you withdraw funds from this account, they have to be used within 60 days.

If you do not utilize the amount within three years of the sale of the first property, such un-utilized amount will be treated as LTCG this will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first / original property.

The interest rates paid on these accounts are the same as those on regular savings and term deposits. Kindly note that interest earned on this account is taxable.

You can invest the capital gain amount in bonds under section 54EC:

Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.

Vishakha Agarwal
CA, Bangalore
448 Answers
85 Consultations

5.0 on 5.0

Dear Sir,

Ideally, your father should get the money and then he can transfer you the money as a gift. Alternatively, your father can first transfer the property to you and then you can sale it. But second option may involve some legal cost.

Yes, in order to claim the exemption, your father can invest the proceeds derived from the sale of the house property into another residential house either within two years from the date of the sale or one year prior to sale, or he can invest in the construction of a new house within three years of the sale.

But if your father is unable to utilise the money till he files his return, money has to be transferred on capital gain saving deposit scheme and can be utilized later within the stipulated time

Please feel free to call/revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

Hello Sir,

Do not take the money in your bank account. Take the entire proceeds in your fathers account and then transfer the same in your account.

You can buy a house property with that money.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP

Rohit R Sharma
CA, Mumbai
2104 Answers
95 Consultations

5.0 on 5.0

I haven't heard of any account being frozen due to huge Transactions.

Whats the transaction value?

Please feel free to call/revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

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