• Capital gain tax on selling a house

Capital gain tax on selling a house

My father intends to sell a house purchased in 1996 for about Rs.1.2 and to buy a new house jointly with me and my wife for about Rs.1.6 Crores i.e. the new house will be jointly owned by 3 of us.  Apart from using the whole of sale proceeds of the sold house, me and my wife will be availing a bank loan of about Rs.40 lakhs to finance the new house.  Will there be any Long Term Capital Gain Tax implication for my father since the new house being acquired with LTCG is not going to be wholly owned by him? will he be eligible for complete tax exemption on LTCG even though the new house to be bought will be jointly owned by him along with me and my wife?  Will there be any tax liability for me and my wife in  the above property transaction? 
Alternatively, can my father first transfer the existing house purchased in 1996 by a gift deed to me and my wife, so that we can we sell it immediately and purchase the new house jointly by me and my wife at the prices mentioned above without any LTCG tax implications?
Asked 6 years ago in Capital Gains Tax

Your father may claim exemption under Section 54F. Such joint ownership qualifies the investment criteria.

You and your wife after purchasing the property, hence no capital gain tax liability.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

If you plan to gift the property first, there would be no impact on LTCG as your father's holding period shall be considered for capital gains purposes. Just that, you'll have to incur extra costs for registration.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

Hi,

No, there will not be any long term capital gain since you will be investing the entire sale consideration in the new property.

You or your wife will not be liable to any tax for the purchase of property. Upon the sale of the property, you and your wife and your father will be liable to pay tax on capital gains.

If your father transfers the property by way of a gift deed, though there will not be any income tax implications, you will have to pay stamp duty and registration on this gift deed. This will be based on the laws of the state in which you live and it is usually calculated as a percentage of the government valuation of the property.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LL.B

Keerthiga Padmanabhan
CA, Greater Mumbai
784 Answers
27 Consultations

5.0 on 5.0

Hi,

Yes, your if your father is investing the entire capital gain amount into the new property, he will get the exemption even if the property is jointly owned.

In case, you go for gift option, it may cause you some additional cost in terms of registration and stamp duty depending upon your state. However, it will be the safest option from tax point of view.

Please feel free to call/ revert in case you need more clarity.

Thanks and regards

Abhishek Dugar

CA CS B.Com

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

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Rohit R Sharma
CA, Mumbai
2104 Answers
95 Consultations

5.0 on 5.0

Hello,

It will not be problem if the new house property is purchased for an amount which is higher than the capital gains of your old property, no matter even if it is a joint holding.

Secondly, it is not a good idea to gift the property first and then sell as it involves additional cost.

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

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