Treatment of Capital Gains from family property

Treatment of Capital Gains from family property

Hi,

This is regarding the anticipated capital gains from a property which has been in our family since ages.

The property belonged to my great-grandfather and was passed onto my father as part of a mutual understanding in the family (apparently, there are no recent property papers available). My father also is no more and currently, my mother, my sister and myself are the survivors. This property is being purchased by my uncle (my father`s brother) off us. I have the following questions:

1. How will the capital gains tax be calculated from the proceeds of this property since we do not have any papers regarding the purchase / construction value etc.?

2. I have a home loan in my name. Can I apply the proceeds from this property in repaying this ongoing home loan and will it be considered as a suitable adjustment u/s 54F?

3. Since I have a home loan for a property which my family uses (mother and sister), we are contemplating taking the payment in my name so that I can offset it paying off the abovementioned home loan? Am I eligible to receive this payment or is my mother only entitled to receive proceeds from the sale of the property mentioned?

Thanks,

Asked 8 years ago in Capital Gains Tax

1) The market value of the property as on 1/4/2001 as per stamp duty value will be the cost of acquisition of your property. Hence, even if you don't have documents to know the cost of acquisition, still you will be able to compute Long Term Capital Gains by taking the market value as on 1/4/2001.

2) Is mutation of the property done in the name of legal inheritors? If its done and your name is included, then you can use the sale proceeds for the repayment of your existing home loan and claim exemption u/s 54F, subject to fulfillment of conditions specified therein.

3) If the names of your family members are included in the property details in the revenue records, then you will be able to get exemption only in respect of your share of sale proceeds.

B Vijaya Kumar

CA, Hyderabad

1029 Answers

124 Consultations

Talk to B Vijaya Kumar

Hi,

1. You may not be having papers regarding cost of house but you must be having papers showing your ownership in the house. In that case, you have to get the property valued as on 1.04.2001 and that value will be deemed as cost of purchase.

2. If you have bought the house one year before the date of sale of this house, you can consider the repayment of loan as exmeption under section 54. Why 54F?? I am assuming both the properties in question are residential property.

3. The person who is the owner of the property is entitled to receive the payment. If your mother is the owner and you want to receive the payment, you have to first transfer the property in your name via gift deed.

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

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This is with reference to my previous question regarding sale of a family property in the absence of my deceased father.

It has been suggested that my mother will be the primary beneficiary of the proceeds from the sale. My mother is a senior citizen and for all practical purposes does not intend to buy another property from the abovementioned capital gains. Her two children / beneficiaries are me and my sister.

I am her married daughter and i have an existing home loan in my individual capacity. Is there a way that we may use the abovementioned capital gains / sale proceeds towards the prepayment of the said home loan and meet our liability for capital gains u/s 54F?

Thanks again

Asked 8 years ago

Hello,

Yes, you mother can transfer the funds to you both stating that considering her age she would prefer buying a property in her children's name in order to avoid issues later on. (please note this is subject to litigation and you will have to fight it out and prove your point to the assessing officer.)

2. You can use it against your existing house loan only if the house is purchased 1 year before the sale of your ancestral property. If it is purchased prior to that , then you will have to buy a new house property for your and your sister.

3. In case you both dont want to invest in house properties then you can invest in capital gain tax saving bonds upto a maximum of Rs.50L which will have a lock in of 3 years.

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

Talk to Rohit R Sharma

Hi,

The cost of acquisition of the ancestral property will have to be computed as on 1 April 2001. You may take the value as per the Registrar's office as the cost of acquisition. This amount will then be indexed.

Since you mother is the sole beneficiary of the property, capital gain will arise in her hands.

To claim exemption, the amount of capital gain may be invested in a new property. Now, this could be even in a property purchased a year prior to the date of sale of the ancestral property. However, since the loan and the new house is in your name, your mother cannot claim exemption on it.

You may have to explore other options of claiming exemption of capital gains like buying another house or investing in NHAI bonds, etc.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LLB

Keerthiga Padmanabhan

CA, Greater Mumbai

784 Answers

27 Consultations

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