What possible way unsecured loans can be cleared with no tax

Dear Sir,

1. It is possible to gift your share of property and settle the issue, but in your case it is an exchange of gifts. So the AO may take a stand that it is actually not a Gift but a Sale of Asset and hence Capital Gain has to be paid. Which is again a debatable issue and will have to be fought out.

2. You cannot take a gift from your nephew, but he can gift it to his father and he can gift it to you.

3. You can route the money back, through your children if you want.

4. Even if you assume it to be a HUF hotchpotch, still it is a clear case of transferring an asset in exchange of waiver of loan. Which can also be termed as a Disguised Sale Transaction. So if you want to adopt this way out, I would advise you to meet a professional who should be in a position to fight it out, if your matter is selected for scrutiny.

Hope this clarifies your query.

Feel free to get back for further clarifications.

Regards,

CA Rohit R Sharma

BCom, CA, LLB - Gen, Cert FAFP.

See last time also we suggested that you take the amount as gift and also gift the properties to them without any consideration.

If any consideration is mentioned then it will attract tax.

For further enquires pl mail at modani005@gmail.com

The consideration can be in the form of extinguishment of liability also for transfer of property. However, when you are resorting to cross gifts, you may risk the provisions of IT Act for entering into arrangements to avoid tax. Further if it involves gifts from relatives who are not covered under the definition of relatives, you may also run the risk of deemed income in respect of such gifts in your hands or in the hands of your relatives, as the case may be Additionally, you may be resorting to under payment of stamp duty in this process. The simple and straight way is to enter into a sale deed. Thus the transaction will be clean and neat and the successors may not have any problem in establishing their title over the property.

The amount agreed to be foregone by your family members towards investment in your firm can be part of your family settlement. The HUF can be partitioned and the properties can be transferred to the members of HUF.

The extinguishment of liability can be your business income, if the liability was created for purchases / expenses in respect of which deduction was allowed in the income tax.

The better way is to receive money under partition and pay off the liabilities, as extinghisment may result in income u/s 41(1) of the IT Act.