• Sister gives sale proceeds to brother, who has to pay tax now?

Parents are not alive and property is now sold by the children (2 brothers and 2 sisters). Sale deed is done by all four as seller and received equal proportion of proceeds of sale. Now, sisters want to gift entire sale proceeds to the brothers. Question is that since sisters have not paid the capital gain tax before gifting than can brothers (once they receive the gift) can pay the capital gain  tax on the received tax?
Asked 2 years ago in Capital Gains Tax from Bangalore, Karnataka
The sisters can give sale proceeds to brother, after meeting capital gains tax liability. The primary liability is on sisters, as they were the owners at the time of sale of the property. 

The brother can pay tax on behalf of his sisters using their PAN and not his PAN, as the tax liability needs to be discharged by the sisters. 

It may also help you to check your 26AS and see how the transaction is reflected. 
B Vijaya Kumar
CA, Hyderabad
833 Answers
46 Consultations

5.0 on 5.0

Since the capital gain has accrued in the hands of sisters, they only have to pay capital gain tax. It is immaterial what they do with the sale proceeds after or before paying capital gain tax. Gift will be exempt in the hands of brothers.
Ankit Adhyaru
CA, Ahmedabad
19 Answers

4.3 on 5.0

Dear Sir,

As the property belong to sisters they have sold the property and received the sale proceeds, they only have to pay capital gain tax. However, practically brothers can pay the capital gain using PAN of sisters.

Gift given by sisters to brothers are exempt from tax. Nobody has to pay nay tax on the same.
Abhishek Dugar
CA, Mumbai
2774 Answers
112 Consultations

5.0 on 5.0

Period of holding in case of inheritance of property shall be counted from when your father had purchased and not from the date when you received in inheritance. So if your father had purchased property before 3 years from the date of transfer by you l, it will be long term capital asset otherwise short term.
Ankit Adhyaru
CA, Ahmedabad
19 Answers

4.3 on 5.0

Dear Sir,

It will be long term capital gain. The reason is mentioned below:

In case of a capital asset which becomes the property of the assessee by way of gift or inheritance the period of holding shall be recokned from the date when the previous owner acquired such asset and the indexation shall also be allowed accordingly from the year of acquisition by the previous owner.

Further, Selling the property after 31 March 2016 will lower the capital gain tax
Abhishek Dugar
CA, Mumbai
2774 Answers
112 Consultations

5.0 on 5.0

Q1. Sister is selling property so she is liable to pay capital gain tax.

Q2. Long term capital gain 
Saket Jain
CA, Greater Mumbai
23 Answers

4.7 on 5.0

In the present case it is suggested that sisters shall pay the capital gains tax and then gift the same to you to avoid legal hassels.

If your father has purchased the same before 3 years then it will be treated as Long term capital gains. Date of purchase by parents will be treated as date of acquisition in case of capital gains
Shyam Sunder Modani
CA, Hyderabad
1408 Answers
95 Consultations

5.0 on 5.0

1. As the sisters were the Legal Owner of their share of property, Capital Gain shall be paid by them. So she can either deduct the Tax Liability and then gift the Balance to brothers or she can gift the entire share to brother and the brother pays her taxes (on her PAN).

2. If the property was purchased 3 years prior to the date of Sale then Long Term Capital Gain or else Short Term.

Trust this clarifies your query.

Feel Free to get back for further clarifications.

Thanking You.

Regards,
CA Rohit R Sharma
BCOM, CA, LLB - GEN, CERT. FAFP.
Rohit R Sharma
CA, Mumbai
2089 Answers
90 Consultations

5.0 on 5.0

Since the capital gain has accrued in the hands of sisters, they only have to pay capital gain tax. It is immaterial what they do with the sale proceeds after or before paying capital gain tax. Also, Gift will not be exempt in the hands of brothers. 
Because as per section 56 (2)where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—
Clause  (a) any sum of money, without consideration, the aggregate value of which exceeds 50000 rupees, the whole of the aggregate value of such sum shal be taxable

Shiv Kumar Agarwal
CA, Delhi
248 Answers
58 Consultations

5.0 on 5.0

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