Income tax returns (ITR) filing: What is tax liability on sale of housing society flat

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Updated: December 12, 2017 4:10:46 AM

My housing society has been allotted land. My share is 200 sqmtr, which I want to sell after registration at the prevailing circle rate.

This deemed cost of acquisition will have to be subtracted from the sale considera-tion for the purpose of computing income under the head ‘Capital Gains’.

My housing society has been allotted land. My share is 200 sqmtr, which I want to sell after registration at the prevailing circle rate. I would like to invest 50% in a flat and the balance to pay my debts. The land has been gifted and no money taken . What will be the tax liability?

– Devam Mehta

Where an assessee acquires a capital asset under a gift or will, cost of acquisition of the property shall be deemed to be the cost for which the previous owner acquired it. This deemed cost of acquisition will have to be subtracted from the sale considera-tion for the purpose of computing income under the head ‘Capital Gains’. If entire sale proceeds are used to purchase/ build a new house within three years, then the entire capital gain shall be exempt. In this case, if only 50% of the sale consideration is spent on the purchase of flat, only 50% of the capital gains shall be exempt.

We had constructed a house in 2005 in my mother’s name. What is the best way to save tax on selling this house: Option 1: She gifts 60% money to me to buy a house in my name as I can take some loan that will save me some tax. What will be tax liability of this 60% money on me and my mother. Will this amount be considered as capital gain?

Option 2: If she buys a plot with me as the first buyer, I will take a home loan. Will I be eligible for tax benefits and PMAY on home loan and what will be my mother’s tax liability?:

—Viraj Singh

Exemption under Section 54 can be claimed only when the long-term capital gains arising in the hands of (your mother) on sale of residential property are reinvested for the purchase of another house property in her name.

Option 1: Your mother: She will not be entitled to claim benefit under Section 54 as the new house will be in your name.

Yourself: Any receipt of money or property from any relative is not taxable. If your mother gifts you the proceeds, such receipts shall not be taxable in your hand.

Option 2: Your mother: Your mother can claim exemption under Section 54 only to the extent of her share in the new property. Further, proceeds have to be used for construction of a residential house within a period of three years from the date of sale. Your mother will be liable to pay tax on the remaining long-term capital gains.

Yourself: As the joint owner of the new plot, you are not liable to tax.

The writer is partner, Nangia & Co LLP. Send your queries to fepersonalfinance@expressindia.com

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