Tax on residential sale proceeds received through a will
Our mother is absolute owner of a Residential property, which she wanted to settle among three children. She made a WILL and proposed that property be sold and sale proceeds should be divided into three equal shares. Three shares should be given to three children, each one share. After the demise of mother the children sold the property and took the shares as per WILL. As per Indian constitution there is no tax on sale proceeds in the hands of children. What is capital gain Tax.
Asked 11 months ago in Capital Gains Tax from Bangalore, Karnataka
Yes you are liable to pay tax on sale of property in question
Talk to Anuj Agarwal
4.6 on 5.0
We Mr, B N Vijayakumar, S/o Sri B L Narayanaswamy, and Ms. B N GAYATHRI D/o B L Narayana Swamy, Deponents, both are residing at No 320 3rd B Cross, 1stJ Main Road Kasturinagar, Bangalore 560 043 do hereby solemnly affirm and state on oath as follows.
That we are the "Will Executers" as per the will executed by our mother, Late. Smt. Aswathamma, W/o Sri B L Narayanaswamy, made on dated 15th day of August 2005
That Smt. Aswathamma, W/o Sri B L Narayanaswamy, residing at No 4 36th Cross 8th Block, Jayanagar, Banglore 560082 as “ Testator”
That the Testator above named was the absolute owner in possession and enjoyment of residental property bearing No 4 situated at 36th Cross 8th Block Jayanagar Bangaluru 560082 and herein referred as "Schedule" Property for sake of brevity.
That the Will Executors above named along with Sri B N Janardhan, Smt. B N Shalaja and Smt. Aruna were the children of Testator.
That the Testator was desirous of settling the above named schedule property among her above named children when she was in good health and sound mental condition in order to avoid any confusion, dispute, or misunderstanding among her children after her demise so that they could retain good relations, made a Testament on 15th day of Aug, 2005 and also made her children Sri B N Vijayakuma and Smt B N Gayathri as the executers of the WILL.
That, as per Testment Smt. Aswathamma left and bequeath above mentioned Scheduled Property to all her five children in the following manner. She proposed that the schedule property to be sold by the executor to fetch a good value, and that the sale proceeds thereof to be divided into six equal shares after deducting all the expenses incurred for the sale. She proposed that six equal shares of the sale proceeds to be distributed among her five children in the following manner:
That two shares of sale proceeds should be given to her unmarried daughter Smt. B N Gayathri. and the remaining four children be given one share each
That in 2008 Smt. Aswathamma expired.
That in 2012 the executors of the WILL carried out the entrusted job and distributed the sale proceeds among the beneficiaries of the WILL and the same was received by the them.
That, the execution of the WILL resulted in the fund (sale proceeds) being given in the hands of beneficiaries and not the property itselt. The implification of Capital gain tax or exemption of capital gain tax does not arise as the WILL supersedes the Income Tax act to regularize the sale proceeds and ensures that the funds (sale proceeds) in the hands of beneficiaries are exempt from Income Tax.
AND WHEREAS, the executors of the WILL along with other beneficiaries are not liable for any Income Tax arising out of the execution of the WILL.
Asked 11 months ago
Dear sir, Even going through that facts as provided by you my opinion does not change on chargebility of tax and view of fact as mentioned above the executors of the WILL along with other beneficiaries are liable to capital gain tax
Talk to Anuj Agarwal
4.6 on 5.0
Sir at the time of death of the mother the property has been taken by children as per her will. There will not be any tax liability at that time.
But at the time of sale of property Capital Gains tax is liable to be paid. Tax will be attracted at the time of sale. The cost of acquisition will be the cost of purchase by their mother.
You cannot escape tax at the time of sale by saying that you received this through will and at the time of sale there will not be any tax.
After paying the capital gains tax the executors can distribute the same in whatever way they want as per their mutual consent.
Talk to Shyam Sunder Modani
4.7 on 5.0
There is no estate duty on inheritance of property. However, when the residential house is sold, the cost to the previous owner will be your cost u/s 49 of IT Act.
Talk to B Vijaya Kumar
5.0 on 5.0
As per provisions of Income Tax Act, 1961 it will be taxable as
When a property is received on inheritance or as a gift, it is not taxable for the receiver. When the inheritor or the receiver of this gift of property, sells it, capital gains on the sale are taxable for the inheritor.
The capital gains shall be calculated in same manner as here, the cost of acquisition and indexation shall be done as follows.
Cost of the property – The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the Property.
Indexation of cost – Additionally, the year of acquisition of the previous owner is considered for the purpose of indexation of the cost of acquisition.
Talk to Bhagyashree Kankaria
5.0 on 5.0
In your case you will not be taxed at the time of receiving the property through will but Capital Gain Tax will have to be paid at the time of Sale of Property.
To Compute Capital Gain you can reduce the Indexed Cost of Acquisition from the Sale Proceeds. Cost of Acquisition will be the Cost on which your Mother has purchased the property.
Trust this clarifies your query.
Feel Free to get back for further clarifications.
CA Rohit R Sharma
BCOM, CA, LLB - GEN, CERT. FAFP.
Talk to Rohit R Sharma
5.0 on 5.0
Dear Tax Payer,
From the given facts, it is concluded that there are two transfers happened which shall come under the purview of the Income-tax Act, 1961.
1. Transfer of the Residential Property from Mother to Children by way of Will.
As per section 56, any gift received under a will or by way of inheritance is exempt from Income Tax. Hence, there is no tax liability when the house property was transferred from the mother to the children by way of will.
2. Transfer of the Residential Property from Children to Third party
This will be considered as a transfer under under the Income-tax Act,1961 for the purpose of capital gain tax. Here, the capital gain shall be taxed equally (1/3 portion) in the hands of each children.
Capital Gain Exemptions Available
1. If the assessee reinvest the capital gain in another residential house property, exemption under section 54 can be claimed by the assessee subject to such conditions as prescribed.
2.Investment in 54EC bonds (NHAI/REC bonds) subject to such conditions as prescribed.
CA. Rajeev P T, BBA, ACA, ACS
*****This Opinion is based on stated facts and the legal position as on date. The views expressed may not be relevant where there is any change in facts or law. This Opinion is not in the nature of an assurance that an alternative view or interpretation cannot emerge.
Talk to Rajeev P T
5.0 on 5.0