• Tax for distribution of land sale proceeds

Dear Sir / Madam,

My father has 4 siblings. He sold his ancestral land after due consent & Power of Attorney from all, and is distributing the proceeds. However, two of his siblings have not yet collected their due shares and my father is holding the money in his account, waiting for them to turn up. It has been close to a year since sale.

In this case:

1. Will my father be? liable to pay capital gains tax even for the unclaimed amount of his siblings?

2. Can he reinvest the entire amount, including the unclaimed cash, into a new property to get tax advantage? He wishes to settle the remaining sibling's dues from his FDs when they come to collect. 

Thank you in advance.
Asked 7 years ago in Capital Gains Tax

Hii

Your father have to pay tax on his share only if he will show Siblings shares as unsecured loan from Siblings

Lalit Bansal
CA, Delhi
773 Answers
61 Consultations

5.0 on 5.0

As per your above said question we give our opinion on an assumption that the capital gains tax is already paid by the father.

1. Your father will be liable to pay Capital Gains on the sale of the Property. After paying tax he can distribute the remaining amount amongst his siblings.

If the siblings dont turn for collection of their share then father can keep the same with him till they come and no additional tax will be levied on him as at the time of transfer he has already paid the capital gains on the total profits.

Shyam Sunder Modani
CA, Hyderabad
1408 Answers
164 Consultations

5.0 on 5.0

Hello Sir,

If the entire land was in your fathers name then your father solely will be liable for Capital Gain taxes even if he distributes the proceeds.

In order to avoid complications, I would suggest you to pay the respective tax first and then transfer the balance amount left to his siblings.

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

Dear Sir,

If the entire land was in your fathers name then your father alone will be liable to pay Capital Gain taxes. However, if the land was in the name of all the siblings, each one of them are liable to pay capital gain on their respective share.

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

1 If the names of your father's siblings are included in the sale deed as vendors, they will be paying Long Term Capital Gains (LTCG) tax on their share of sale proceeds. If he offers the share of the siblings, who still did not get money, still the LTCG will have to be offered in their income tax returns.

2 If your father wants to invest the unclaimed cash into a new property to get tax advantage, he may do so by including their names as joint owners in the new property. However, as it not desirable, their share may be transferred back to your father after the mandatory holding period of 3 years.

B Vijaya Kumar
CA, Hyderabad
1001 Answers
124 Consultations

5.0 on 5.0

Ask a Chartered Accountant

Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
  Ask a CA