Sale of property

You need to first get it's valuation report from a government approved valuer for 01.04.2001 and then index it using cost inflation index provided by government to give inflation effect and then find the capital gain.

You can save Capital gain by either investing in bonds u/s 54EC or buying a house property u/s 54F.

No your sister won't have to pay any tax as it's a gift from her mother.

But if your mother gifts the amount to your sister she might have to pay tax.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

If you need personal consultation you can have a phone call.

 

If you want to save Taxes on Capital Gains, there are two major ways.

1. Get valuation report of this property for the date 01.04.2000,  from a giverment authorized valuer. The value that he gives you will be important. So choose wisely. Now this value will be indexed to the year of sale. Means suppose he gives you a valuation of 3 Lakhs Rs. For 01.4.2000. Then your indexed value will be (3 Lakhs *280/100) indexation chart for year 2018-19 is 280 and the year 2000-01 is 100.(Indexation for 2019-20 is not notified yet but will be arround 288. So calculate accordingly. If we take 288 for now, your indexed cost will be 8.64 lakhs. So your capital gain will be 1.25 cr (sale value) Minus 8.64 lakhs. ie:- 1.17Cr. 

Now if you want to save more gains, add repair/renovation related construction expenses to your cost and that too will be indexed.This should be supported by bills. Need to discuss on personal consultation on this more.

Or you can invest in NHAI bonds or purchase other residential property to save taxes.You need to invest the amount of capital gain earned ie 1.17 Cr in new property. Also if you have no other income , initial 2,50,000 Rs of capital gain will be exempt as per inckme tax slab.

 

When you gift the money to your sister, it will be tax free, as gift to relatives is exempt.

Chart of indexation for yohr reference.

SI. No.

Financial Year

Cost Inflation Index

1

2001-02

100

2

2002-03

105

3

2003-04

109

4

2004-05

113

5

2005-06

117

6

2006-07

122

7

2007-08

129

8

2008-09

137

9

2009-10

148

10

2010-11

167

11

2011-12

184

12

2012-13

200

13

2013-14

220

14

2014-15

240

15

2015-16

254

16

2016-17

264

17

2017-18

272

18

2018-19

280

 

Please rate this answer 5, if you find it informative.

 

Since, the house is owned for more than 2years it is long term capital gains taxable at 20%+surcharge (if applicable) + cess of 4%.  The capital gains would be sale price less the indexed cost of acquisition.

The cost would be the actual cost as incurred to buy that property.  Indexation is a cost inflation index which is notified by the Govt. It is done to adjust for inflation over the years. This increases one’s cost base and lowers the capital gains. Capital gains = sale price -  indexed cost of acquisition – any other expenses incurred for executing sale. You can add the registration cost to your purchase price. The indexation are notified values and you need to consider the same for the year you acquired the house and sale the house. Since, your mother owned the house prior to 2001, you can claim fair value of the house as on 2001. 

Your mother can invest capital gains for purchase of another house to save tax.  She should purchase a residential house either 1 year before the date of sale or 2 years after the date of sale. In case of constructing a house, she will have to construct the residential house within 3 years from the date of sale. Until such purchase, the gains can be deposited in a PSU bank or other banks as per the Capital Gains Account Scheme, 1988. This deposit can then be claimed as an exemption from capital gains, and no tax has to be paid on it. However, if the money is not invested, the deposit shall be treated as capital gains in the year in which the specified period lapses. The other option is to buy specified bonds issued by National Highway Authority of India or Rural Electrification Corporation.  There is a lock in period of 5 years post investment in these bonds. This investment is to be made in 6 months of sale of asset.

 

IN case she wants to gift, the gift is not taxable in the dayghter hands. Since, mother must have paid tax, sister won’t be taxable.  However, if your sister earns any income from that, that will be taxable in mother hands.  IT is advisable that the asset is transaferred by way of will or inheritance instead of gift. 

Hello,

 

It would be Long Term Capital Gain taxable in your mother hands.

LTCG would be Sale consideration minus the indexed cost of acquisition and improvements and transfer expenses if any.

Since the property was acquired before 2001, the cost of acquisition would be FMV as on 1 April 2001, for this you need to get a valuation report from a registered valuer. Then the FMV would be indexed up to 2019 using cost inflation index.

To save capital gain, you need to invest the capital gain in another house property with a specified time period under Sec. 54/54F or you can invest in NHAI/REC Bonds under Sec. 54EC.

A gift from a relative under income tax is exempt. So you sister won't be taxed at any money gift received from her mother. Though your mother would be taxed at this LTCG if she doesn't invest the proceeds as per the above sections.

I hope this answer satisfies your requirement.

 

Regards,

CA Hunny Badlani

Dear Sir,

 

Hope you are doing well !!

 

 

As such date of acquisition falls prior to 1 April 2001, she has a choice to consider the Fair Market Value (FMV) of the property as on 1 April 2001 as her cost. 

 

So, firstly she needs to get the valuation report of property as on 01.04.2001.

 

Exemption from long term capital gains

 

She can claim an exemption from LTCG, under section 54 of the income-tax Act if the LTCG is reinvested in a new residential property located in India within the specified time frames. Where the new property is purchased, the gain is required to be reinvested either within 1 year prior to sale date or 2 years after the sale date. Where the new property is constructed, the time period prescribed for the reinvestment is within 3 years from the date of sale of the original asset.

 

 

Alternatively and/or additionally, she can invest the capital gains of up to Rs 50 lakhs in bonds of NHAI or REC, within six months of its accrual and get the exemption u/s 54EC.

 

-No, there will be no tax liability on your sister for receiving money from mother as the gift from the relative is not covered in the taxable income in the hands of the recipients.

 

-. It is advisable that gift the entire amount through banking channel and prepare a gift deed for the same.

 

 

 

Dear Sir,

 

Please find below the link for calculate inflation indexing:

 

https://www.incometaxindia.gov.in/Pages/utilities/Cost-Inflation-Index.aspx

 

Further,to calculate the long-term capital gains tax payable, the following formula is to be used:

Long-term capital gain = full value of consideration received or accruing – (indexed cost of acquisition + indexed cost of improvement + cost of transfer), where:

Indexed cost of acquisition = cost of acquisition x cost inflation index of the year of transfer/cost inflation index of the year of acquisition.

Indexed cost of improvement = cost of improvement x cost inflation index of the year of transfer/cost inflation index of the year of improvement.