My father who is now 75 yrs old has received money after selling is ancestral property. Now we want to purchase a new apartment and as the amount is less the plan was, i will take the loan and father will make the initial downpayment. But when we are trying to apply for loan, bank is not allowing his name as he is more than 70. Without his name will it not become taxable on him.? Any other way he can avoid the tax? Will any declaration help in this case.
Dear Sir,
In order to take exemption new house should be in your father's name and not the loan.
You can take loan in your name. Bank may insist you to become a joint owner of the property.
Please feel free to call/revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Thanks for your quick reply, but i didnt got my answer. Bank is telling us that co owner should also be part of co applicant of loan. And co applicant cannot be more than 70 yrs. That is the rule. Is there any way that i can include fathers name in sale deed or something so that he gets the tax relief. How can i include my fathers name and still take the loan ? Please note that he is 75 retired govt. Employee. He is not eligible for loan.
In an idle scenario, you gather should at least be a joint owner of the property. First option is you can try different bank.
However, there are certain rulings wherein tribunals have held that even if the house is not in the name of the person who is liable to pay capital gain, then also exmeption would be allowed. The logic is law says your father should invest the money of cap gain in new house which he is investing. Law does not specify that house should be in his name.
Tax officer may challenge it and you need to fight it out in the tribunal.
Please feel free to call/revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
U/s 54 of the Income Tax Act, "the assessee has, within a period of one year before or two years after the date on which the transfer took place, purchased or has within a period of three years after that constructed one ..." Thus the assessee has to purchase or construct... This is possible only if he the assessee is the owner or a co-owner of the property.
Now if he is a co-owner, you will have a problem in taking loan, as he is more than 70 years old. This is a catch 22 situation.
In my view, you can try these two following alternative courses of action:
1) In the case of a "purchase of a new apartment", you can perhaps add him as a beneficial owner in the sale deed, specifically declaring that he is a beneficial owner to the extent of his investment of capital gains in the apartment being purchased and he will be a consenting party to the sale deed, so that bank will not have any problem in lending, as he is not the joint owner. However, the property value for the purpose of the loan will be reduced to the extent of beneficial ownership held by your father. Thus you will be able to raise loan as he is not the joint owner and he is only a consenting party. From the tax point of view, he "purchased" his beneficial ownership, though not as a co-owner.
In this method, you will not be able to get loan on the full value of the property.
2) Your father can be still a joint owner but declare in the sale deed that his share of the property will revert to his children in whatever proportion he wanted to get it done. Thus the beneficial ownership of his children will get recorded in the sale deed and on this basis you may convince your bank to include the beneficial owners as the co-borrowers.
In this method, you will able to get loan on the full value of the property.
You need to draft the sale deed suitably in consultation with your chartered accountant and a lawyer, preferably the bank lawyer himself/herself.
Alternatively, if you can wait for 3 years, invest in Capital Gains bonds upto Rs 50 Lakhs u/s 54EC and in specified units u/s 54EE for another Rs 50 Lakhs. After 3 years, the money will be available to you without any restriction. This will be simple and straight forward.
Hi,
Let the new property which you are planning to buy be in joint name of your father and you. You can take Bank loan to finance the difference amount.
This way your father will not lose Section 54/54F benefit and I don't think Bank will have any issue in giving Loan to you
No problem in that case. There are many rulings which states that you can purchase property in your son/ daughter/ spouse name to get exemption of capital gains due to some unavoidable circumstances.
You can take loan and property purchase on your name and use fathers sale amount as margin money and remaing loan. you and your father enter into understanding that the amount of capital gains is invested in the property and due to age and other reasons the same is not purchased in his name.
Hello Sir,
This is the first time I am hearing such a rule. The bank normally does not allow the person to be a sole applicant but when clubbed with an eligible candidate it should not be a problem.
I will advise you to visit some other bank and recheck.
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
