I had purchased a flat in November 2012 for 29 lakh rupees. I had sold the flat in December 2017 for 49 lakh rupees. It was a joint property with my mother. Now, if i consider the inflation indexing, buying cost of that property in year 2012 comes as 39,44,000 rupees (please correct if wrong). which means a profit of 9,56,000 rupees. This profit will be divided between me and my mother (4,78,000 rs). Now, the question is.... if i want to re-invest this 49 lakh rupees in a new property, but want to register it only on my name then my mother will have to pay tax on her profit of 4,78,000 rs? She has no income so would the tax be flat 20% or she will get exemption of 3 lakh for senior citizens before calculating the tax? Also, i want to mention that the property i have sold was yet not registered as we haven't got the possession of the flat. We had bought it in resale from a person who had directly purchased the flat through the builder.
Your calculation of profit is correct.
Yes your mother would have to pay tax and she will also get benefit of 3 lac exemption. Therefore her effective taxable income would be 1.78 lac on which tax @20% plus 3% cess would be payable.
Not registeration of property doesn't affect anything as long as you have the payment agreement.
Hi
As per the income tax laws, your mother can invest her sale proceeds in your name in order to claim exemption for reinvestment. So, there would be no capital gain tax liability.
Hi,
No your mother need not to pay tax. You and she both can claim exemption under section 54/54F to save capital gain taxes.
New property can be in your name or joint name of yours and your mother.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Hi,
Your calculation and understanding is correct. However your mother need not pay any tax.
Both of you can claim the exemption u/s 54 to save capital gains tax.
Hope this helps.
As per the infof provided, Legally property which is not registered on your name is not yours.you might not have booked it in your accounts too and if purchase is not booked then hw can u show sale of that property.
Gain will be taxed in hands of registered property holder.
The property you are buying, you are investing the whole money your share as well as your mother. Now you are buying solely in your name. As per income tax, there is a deemed ownership concept under which if you are investing your money to buy property in other's name, you shall be the deemed owner of the property though the registered name could be of other person. Moreover registration of property doesn't matter. So in this case there shall be no long term capital gain in her hand taxable as the entire ltcg is invested. She shall be 50% owner of the new property
Yes, In case of your mother you can avail basic exemption limit of Rs. 3L and balance is Taxable @ 20%.
In your case, you can avail deduction u/s 54 by investing in another property.
Thanks,
CA Sourabh Pahuja
As the property purchased by you is not yet registered and is still in the name of the vendor, who is the original buyer, the Long Term Capital Gains (LTCG) will have to be computed in his hands, unless, he offered it as a sale in his IT return when the possession was handed over to you, treating it as a deemed transfer. If he had not offered this to tax and he will be signing the sale deed now, the entire LTCG will be in his hands. Please check this aspect and if there is any documentary evidence to show that the property was indeed acquired by you in 2012, it may help you to establish your beneficial ownership in the property and thus take the LTCG in your hands. The vendor may then get notice from the IT Dept for concealment of income by way of LTCG. The facts need to be properly established first with documentary evidence. I suggest you should take professional help by sharing the documents you executed.
Now assuming that the LTCG is to be assessed in your hands only, the indexed cost of acquisition of Rs 39.44 Lakhs is correct and your LTCG will then be Rs 9.56 Lakhs as mentioned by you. In the sale deed mention the shares of yourself and your mother clearly so that her share gets assessed in her hands separately and you will be assessed only in respect of your share of LTCG.
Assuming that the shares are properly mentioned in the sale deed, your mother will have to pay tax on LTCG only after the basic exemption of Rs 3 Lakhs. Thus her tax liability will be on Rs 1.78 lakhs only, i.e., her share of LTCG. However, there should be adequate documentary evidence that the purchase price of Rs 29 Lakhs was also paid by her in equal proportion. Otherwise, entire LTCG will be assessed in your hands only.
Hi,
Please note that co-ownership of property does not mean that profits/ cost/ taxes would also be divided. For Income Tax purposes, it is only the source of money of a person that determines the same. If your mother has no income that implies that the flat was purchased solely from your income and hence only you would be liable for taxation on the same.
Any income/ gains/ loss of your mother from the same shall be added to your income/ gains/ loss only.
Hence, you are only liable for taxation on same.
Secondly, since you said that the property was not yet registered nor the possession of the property was handed over to you. It means the acquisition of capital asset was not yet completed. Hence the money given by you shall be treated as only advance given for purchase of property and any return on the same shall be treated as income from other sources only.
There is no concept of Capital Gains in your case since neither possession nor sale deed was executed.
So the return of 20 Lakhs (i.e. 49-29), will be taxable in your hands only as Income from Other Sources.
Regards
If registry was not and done i had taken the possession, then it would be considered as LTCG or still it would be from other source of income?
Basically if the registry is not made and the possession had been transferred then, section 2(47) will be attracted and the same will resulted into Capital Gain tax. Indirectly you are transferring your rights from the property.
Thanks,
CA Sourabh Pahuja
If possession was taken by you and entire amount of sale consideration was transferred by you to the seller, then pending execution of sale deed it will be considered as acquisition of capital asset and hence capital gains tax shall be levied.
If possession was taken by you, it will still be treated as capital gains because the entire amount of sale consideration was transferred by you (so transfer of property is already effected) to the seller and only the execution of sale deed was pending.
You must be having some agreement with the seller .. right? Such agreement would entitle you to a right in the property and this making it a capital asset. So, it would be capital gain and not other sources income.
That has nothing to do with your capital gain. It is based on your property sold. You are deemed owner of your new property though not registered
It would be considered as LTCG only.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
it would be from other sources income.
Dear Sir,
1) Indexed cost of acquisition of Rs. 39.44 lacs is correct.
2) Your mother would be entitled for exemption of Rs. 3 lacs and need to pay tax @20.6% on Rs. 1.78 lacs.
3) Due date of ITR for A.Y. 2018-19 is 31.07.2018. There is ample time left to get the registry done. Registry is must to claim the benefit of investment in second house.
Thanks
