Tax on exchanging properties

My brother and I live in mumbai but far from each other. We are both established in our jobs at different companies. We are considering exchanging our properties because that will make both our commutes much shorter. We both have owned these properties for 4 years, so question is, how can we go about accomplishing the exchange without attracting capital gains tax? Thankyou.
Asked 1 year ago in Capital Gains Tax from Mumbai, Maharashtra
You are gift the properties  to each other. It would not attract any tax implications as gift to a real brother is exempt  from tax
Regards 
Ankit Jain 
ankit@ajsh.in 
9810661322 
Ankit Jain
CA, New Delhi
32 Answers
4.4 on 5.0
  Talk to Ankit Jain
For each individual, there is a sale and then purchase of property. So far as sale is concerned, long / short term capital gains will be applicable based upon the date of purchase, sale value and the capital gains on sale. 

As the seller invests again in the residential house, the seller can claim exemption u/s 54F of the Income Tax Act 1961, subject to the compliance with the conditions specified therein.

Thus each individual will have capital gains and the actual  tax liability depends upon the cost of acquisition, date of acquisition of original asset and then compliance with the conditions specified u/s 54F
B Vijaya Kumar
CA, Hyderabad
290 Answers
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  Talk to B Vijaya Kumar
You both can execute a mutual gift deed, this will avoid capital gain implication.
Swapnil Patil
CA, Navi Mumbai
29 Answers
4.3 on 5.0
  Talk to Swapnil Patil
I do not suggest cross gifts for the following reasons:

1 There may be variations in the value of the two properties, which needs to be settled again by cash or any other mode.
2 The cost of acquisition of the property in the hands of the donee for the purpose of capital gains at the time of sale  will be the original cost of the acquisition for the donor and  donee will have to bear the component of capital gains which would have otherwise been borne by the donor at the time of original transfer. Thus there may be inequalities as and when the donee decides to transfer the property in future.
3 As and when the donee transfers the property in future, he may or may not be able to claim exemption u/s 54F. 
4 The transaction of cross gifts may also be subject to probe by the Income Tax Department and the assessment may not be smooth. The capability of the assessee to face such scrutiny and the cost of such scrutiny will also have to be borne in mind.

If the capital gains are very significant and the tax liability is very huge in the present transaction, then it may be worthwhile going for cross gifts by suitably structuring the transaction after factoring into the uncertainties relating to inequalities in future tax liability. 
B Vijaya Kumar
CA, Hyderabad
290 Answers
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In our view Yes you can gift the property to each other and transfer the title. There is no restriction. You need to write the purpose of the same and substantiate.


Shyam Sunder Modani
CA, Hyderabad
955 Answers
4.9 on 5.0
  Talk to Shyam Sunder Modani
I agree with the View of Vijaya Sir, cross gifts are not advised in situations wherein there is a Long Term Capital Gain transaction and the individual can claim benefit u/s 54 unless the Tax Implications after considering the benefit u/s 54 are huge.

It is better not to indulge in Cross Gifts as it is at times difficult to substantiate and causes under harassment.

Still the final decision lies on the Assessee.

Regards,

CA Rohit R Sharma
www.raskassociates.com
Rohit R Sharma
CA, Mumbai
719 Answers
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Section 56(2) of the Income-tax act deals with the receipts without consideration, wherein it has been provided that gifts received from relatives are exempt from this provision and will not be included as income in the hands of recipient. 

In my opinion, you can gift the property to your brother if he is directly related to you and can avoid capital gains. However, ensure that it is purely a gift and no consideration,in whatever manner, for the same is passed on since it will not be considered as a gift.
B S Sridhar
CA, Chennai
35 Answers
5.0 on 5.0
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You need to enter into a gift deed and get the property transferred on the basis of the deed. Because there is no consideration in your case at the time of transfer of property

Regards
Ankit Jain
ankit@ajsh.in
Ankit Jain
CA, New Delhi
32 Answers
4.4 on 5.0
  Talk to Ankit Jain
As you both are brothers gift you property to each other you will not attract tax on gift.
Kavit Dilip Gadhia
CA, Mumbai
35 Answers
4.2 on 5.0
  Talk to Kavit Dilip Gadhia

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