Income tax on property transfer among cousins

To transfer your cousin sister's 50% share in the ancestral property to you, you can consider either a Gift Deed or a Release Deed. Both have different legal and tax implications:

1. Gift Deed:

   • If your cousin sister gifts her share of the property to you, no income tax will arise in your hands as it falls under the definition of "gift" from a relative under Section 56(2) of the Income-tax Act, 1961. Under this section, cousins are not considered "relatives." Thus, if the gift is not between relatives, it will be taxed in the recipient's hands as income from other sources if the property’s value exceeds ₹50,000.
   • Additionally, for gift deeds, there will be stamp duty and registration charges based on the property's market value, which varies by state.

2. Release Deed:

   • A release deed (also known as relinquishment deed) is used when one co-owner releases their share in favor of another co-owner. This would also attract stamp duty, though it is usually lower when executed between family members.

Capital Gains Consideration:

• Since the property was purchased in 1978, the cost inflation index will play a significant role in determining the indexed cost of acquisition for capital gains calculation. If the release or gift triggers capital gains, your cousin will be taxed based on the fair market value of her share minus the indexed acquisition cost.

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

- Will you pay any consideration to uncle's daughter against transfer of 50% share in your favour?

Assuming no consideration is payable

- Draft a release deed and get it registered. A conveyance deed would be executed for 100% ownership/title in the property and you would be liable to pay stamp duty and registration charges on transfer of 50% share in your favour

-  No income tax would be payable by either of the parties. Income tax would be payable when you sell it in the future

For detailed discussion you may opt for phone consultation

If your cousin transfers her share via a Release Deed without any payment, no capital gains tax (CGT) applies to either of you right now. You will only pay CGT when you sell the property in the future.

If consideration is involved, your cousin may have to pay CGT based on the property's indexed value.

For a Gift Deed, you may be taxed under income tax laws since cousins are not considered "relatives" for tax exemptions.

In short, no CGT for now if no payment is made​​​.

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

To transfer your cousin sister's share of the ancestral property to your favor, you have a couple of options: a release deed or a gift deed. Each of these options has different implications in terms of legal process and tax liability.

Release Deed vs. Gift Deed

1. Release Deed: This is commonly used when one co-owner of a property relinquishes their share in favor of another co-owner. This is generally considered a sale and involves some consideration (payment) from the person acquiring the share.

2. Gift Deed: This is used when a property is given from one person to another voluntarily, without any payment in return. Gift deeds between close relatives can be exempt from tax under certain conditions.

Tax Implications

• Income Tax: If you choose the gift deed route and the property is gifted to you by your cousin sister, there is no income tax payable by you as the recipient of the gift. However, the gift of immovable property without consideration is not taxable in the hands of the recipient if it comes from a relative. The list of relatives includes sister, so the transaction should ideally be exempt from income tax under Section 56(2) of the Income Tax Act.

• Capital Gains Tax: If you opt for a release deed, and your cousin sister receives consideration for her share in the property, she may be liable to pay capital gains tax. The tax will be based on the difference between the indexed cost of acquisition and the amount received. The cost of acquisition for her would be the cost at which your father and uncle bought the property, adjusted for inflation (indexed).

No Immediate Sale

As you do not intend to sell the property in the near future, any capital gains implications for you would be deferred until you decide to sell the property. However, you would need to keep track of the acquisition cost and any documentation related to this transfer, as it will affect the calculation of capital gains whenever you choose to sell.