• Capital asset transfer by husband in wife's name through sale deed

A husband has purchased a residental house two years ago amounting Rs 20 lac & transfer it in the name of his wife via sale deed Rs 50 lac.  There is no any physical cash transaction exits between wife & husband.  So whether husband is liable to pay LTCG on it?  Further is wife is also liable to pay tax on entire Rs 50 lac as unaccounted income.  Please eloberate your view with judgment & section.
Asked 2 years ago in Capital Gains Tax from Patel Nagar, Delhi
Dear Sir,

If there is sales deed of Rs. 50 Lacs than LTCG Liability shall arise and same shall be payable.

It will not be taxed to wife and unaccounted income as she has not paid any amount yet. If he pays the amount to Husband and source of the same is not justified than it will be taxed as income of wife.

Both the things are bare act only. As per section 45,52 of Income Tax Act,1961 for Capital Gain.
Vishrut Rajesh Shah
CA, Ahmedabad
605 Answers
10 Consultations

5.0 on 5.0

I am not sure whether it is an arms length transaction or not.  What is the need for the husband to sell the house to his wife without receiving the money? 

The following issues need to be addressed in arriving at the tax liability in the hands of husband as well as his wife:

1 As the property is transferred by the husband to his wife by way of sale, capital gains will arise. If the property is held for more than 3 years, it will be LTCG otherwise it will be STCG.

2 Even if the sale proceeds are not received, you will be liable to pay LTCG/STCG.

3 Even if the sale proceeds are received, if the source of payment is your own gifts to her, it is possible that clubbing u/s 64 will apply, in which case there may be a complexity about the liability to the capital gains. 

4 If the sale consideration is less than the stamp duty value, then the difference between the sale consideration and the stamp duty will be income in your hands and also in her hands. 
B Vijaya Kumar
CA, Hyderabad
845 Answers
48 Consultations

5.0 on 5.0

Hello Sir,

Considering the case mentioned here by you, it is very difficult to understand your modus operandi, that why did you frame such a transaction as it does not solve any of your purpose but instead complicates the same.

1. If the Sale transaction is executed and the Sale Deed is made in the name of the wife, then Capital gain shall arise. As you explained that the property was purchased 2 years ago, then it shall fall under the Short Term Capital Gain transaction and will be taxed as per Slab Rate.
No Tax saving investment measures can be adopted.

2. Wife is not liable to Tax unless she pays you the money. If she does, then the source of the money will have to be explained.
But if she doesn't then Clubbing provisions shall be applicable and you will be the deemed owner of the house.

And I assume that the Sale Value of the property is higher than the Ready Reckoner Stamp Duty Value, otherwise the difference between the Sale Value and Stamp Duty Value shall also be taxable.

Hope this clarifies your Query. 

Feel Free to get back for any further clarifications.

Thanking You.

CA Rohit R Sharma. 
Rohit R Sharma
CA, Mumbai
2104 Answers
91 Consultations

5.0 on 5.0

Practically yes.

In the present case you need to explain the officer about the reason of doing so. You could have gifted the property instead. In the sale deed we think you have mentioned that wife paid 50 lakhs to husband.

If the officer is satisfied then there will not be a problem.
Shyam Sunder Modani
CA, Hyderabad
1408 Answers
95 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