Capital gain investment in joint property

My Mother-in-law (aged-65) sold her 20 year old house for 40L and buying new under construction property for 60L which will be completed in less than a year. however she is not having additional capital of 20L for new purchase so she wants to buy property jointly with her married daughter who will contribute rest of the 20L through bank loan. I've two questions on this proposition.
1. Is this joint purchase possible considering above scenarios?
2. Can we make joint property on 50:50 basis where Mother-in-law will invest 30L & daughter will take 30L loan? the remaining 10L with mother-in-law will be used for construction improvement, interior , repair work etc. before completing 2nd  year of capital gain. is this possible? and will it exempt 40L under Sec.54F?

Thanks for you advise.
Asked 3 days ago in Capital Gains Tax from Hyderabad, Telangana
Hi

1. Yes, this can be done in ratio of costs borne.

2. As per 54, you need to invest the capital gain amount. Work out the cost of acquisition by indexing the FMV of the house sold as on 1.4.2001. You need not invest entire 40 lakhs.
Lakshita Bhandari
CA, Mumbai
700 Answers
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As your mother in law is buying a new house out of the sale proceeds of an old house, she will be eligible for exemption u/s 54, under which it is sufficient to invest only capital gains part (not the entire sale proceeds) to claim exemption. Hence, you may work out her LTCG and invest that part as a joint owner in the new house to claim exemption u/s 54. The ownership ratio may accordingly be decided. If by investing her LTCG, she can get only say 40% ownership in the new house and her married daughter's contribution is not sufficient she can give loan to her daughter with or without interest. She may even gift the amount to her daughter without attracting any tax liability.
B Vijaya Kumar
CA, Hyderabad
767 Answers
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Firstly, you are eligible for exemption under section 54and not under section 54F. Under section 54, You don't need to invest the entire sales. You may choose to invest only capital gain amount.

Further, you can buy the property in joint name. Its important you clearly mention the proportion of ownership in the ration of investment made by each co owner.

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
2201 Answers
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1. Correct

2. You need to get the stamp duty value of the property as on 1.4.2001. that value will be indexed till the date of sale.

3. You don't need any certificate for the calculation. You can use the calculator but do make sure the authenticity of the calculator. It's not necessary every calculator is correct.

4. Yes, she will not to file return for showing the capital gain.

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
2201 Answers
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1) Yes, you need to compute indexed cost of acquisition of the property for arriving at long term capital gains.

2) The fair market value as per stamp duty value as on 1st April 2001 will be the basis for arriving at indexed cost of acquisition. Though you purchased the land in 1996, its stamp duty value as on 1st April 2001 as per revenue records will be the basis for arriving at indexed cost of acquisition.

3) You can arrive at the indexed cost of acquisition by the stamp duty value as on 1st April 2001 by  multiplying it with  the index in the year of sale divided by hundred. Thus if the stamp duty value as on 1st April 2001 is, say, Rs 10 Lakhs, the indexed cost of acquisition in the year of sale, viz., FY 2017-18 will be 27.2 Lakhs, i.e., 10*272/100. 272 is the index prevailing in FY 2017-18. There is no need to submit any documentary evidence, as the index is fixed by the Government itself. 

4) YEs, your mother in law needs to file IT return and disclose her capital gains.
B Vijaya Kumar
CA, Hyderabad
767 Answers
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