Shivanand Yalsangi recently sold his flat for Rs 48 lakh. After indexation calculation, he found that there is no tax liability on account of long-term capital gains from the property. However, Shivanand is worried about a few things.
The property sold was in the joint name of Shivanand and his wife. In an email sent to FE Money, Shivanand shared that the buyer of his flat transferred full money to the joint account but registered the Sale Deed for less amount to avoid Stamp Duty, a practice commonly known as undervaluation of property.
Shivanand is now wondering whether he should show the full sale consideration in his ITR for FY 2023-24 (AY 2024-25) or not.
“I think if I show full value, I will not get any notice from the IT Dept but the purchasers will get a notice for the mismatch. I think the purchasers are not filing tax returns. Please advise whether to show full sale consideration or sale deed registered amount in my ITR for FY 2023-24 even though there is no LTCG for me,” Shivanand asked.
Further, Shivanand wants to know whether he can invest the money in a bank in a joint name on either or survivor basis – Rs 20 lakh in his name and Rs 28 lakh in his wife’s name.
As the sale proceeds were credited to the joint account, Shivanand also wants to know whether the LTCG (loss) should be divided into two parts. Or, should he show the full loss in his return being the first holder?
Also Read: I am an NRI in Canada. My ancestral property is being sold in India. What can I do to save tax?
Shruti K.P, Partner, INDUSLAW has answered Shivanand’s queries:
Since you have confirmed that there is no capital gains tax liability arising after the indexation benefit, you may invest the money in any manner, depending upon your investment choices.
Further, Section 50C of the Income-tax Act, 1961 (“ITA”) comes into play to curb the malpractice of undervaluation of property, which would result in revenue loss to the Government. As per section 50C, where the consideration received or accruing because of the transfer of land or building is less than the Stamp Duty Value (“SDV”) (subject to a 10% tolerance range) adopted by the State Government, then SDV shall be deemed to be the sale consideration for the purpose of computing capital gains. Thus, in your case, it is advisable to report the entire amount of sale consideration (and not the sale deed registered amount) in your ITR for FY 2023-24, even though there is no taxable long-term capital gain.
We assume that the property was jointly purchased by you and your wife and accordingly, both of you will be treated as co-owners of the property. Since it is a jointly owned property, you are eligible to claim the long-term capital loss in your ITR only to the extent of your share in the property and not the entire amount.
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