Capital gain treatment on family settelment (Income Tax)

This query is : Resolved

( Author )
31 May 2012

Case:
1. there are two property i.e X & Y.
2. Of property X, there are 3 co-owner.(A,B & C) having equal share.
3. Of property Y, There are also 3 co-owner.(A,Wife of B & wife of C).having equal share
4. Now as per there mutual understanding –A will transfer her share in property X in the favour of B&C,
5. for which A will get rs.30 lakhs from B & C.
6. Futher A will get the Property Y share from the wife of B & C in her favour.

Now the following query asire.
a).Is this family settlement is exempted from the tax.(any reference if any)
b).If not ,then what will be the tax implication.

For your help, take the value of X-Rs.90 lakhs & Y-Rs.30 Lakhs.

CA PARAS BAFNA

( Expert )
31 May 2012

To my view, show all the property including Cash ....as family property in the Deed/Document to be prepared for the Family Arrangement mentioning about the ownership and currently held by so and so person.
.
Distribute the same in the desired manner.
.
It is not necessary to show that B&C will pay to A, What ever cash B & C are having , the same can also be said to be of the family.
.

CA Vijay Kumar Gupta

( Expert )
01 June 2012

Transfer of capital assets through family settlement is laiable to capital gains. Liable to capital gain either short term or long term depends upon period of holding.

KARANDEEP,CA,B.Com,CS FNL

( Author )
01 June 2012

Dear expert, how to avoid the capital gain tax or minimize the tax.
and its transfer between the family members only and that to without consideration and received the cash last year and transfer going to take place in coming month.

How to do the above transcation.

CA SURENDRA KUMAR RAKHECHA

( Expert )
02 June 2012

First of all; please inform how the above properties were acquired.
.
Whether these are ancestral properties or self acquired ?

KARANDEEP,CA,B.Com,CS FNL

( Author )
03 June 2012

these are the self acquired property.

CA SURENDRA KUMAR RAKHECHA

( Expert )
03 June 2012

Whether both the properties are held for long term ?

CA SURENDRA KUMAR RAKHECHA

( Expert )
03 June 2012

.
1. Whether A is having any other property (in addition to property X and Y )?
.
.
2. Whether both the properties are used for residential ?

CA SURENDRA KUMAR RAKHECHA

( Expert )
03 June 2012

Hint :
.
After "fixing" the problem on the above matters, please take the following points into your mind :
.
1. Calculate capital gains for Lady A :

Rs.30 Lacs

( for leaving 1/3rd share in property X )

+

Rs.20 Lacs

( 2/3rd share acquired in property Y from wife of B and C)

-

Indexed Cost of Property X
.
.
2. Now apply deduction of Rs.20 Lacs for acquisition of property Y

(from wife of B & C);

if applicable as per Capital Gains Exemptions

.
Note :
.
Since the properties are not ancestral hence it is not a matter of family arrangement because both the properties are already being assessed in the hands of different assessees.
.
If none of them is/are assessees or the balance sheets were not filed and/or no income were derived/claimed therefrom; then planning would be different.
.

CA SURENDRA KUMAR RAKHECHA

( Expert )
03 June 2012

If still the facts are different; then whole working would be different.
.
I have assumed in the above working that it is not a family arrangement.
.
But; if one is interested to gift the property in favour of other relative; then to that extent it would be reduced ( then the sale price of property X would be restricted to only Rs.30 Lacs and Rs.20 Lacs would not be added).
.
Otherwise the "deemed consideration" would be Rs.50 Lacs as narrated above if not proved differently.
.

.

CA SURENDRA KUMAR RAKHECHA

( Expert )
03 June 2012

Capital Gains Taxation is one of the most typical part of Indian Income Tax.
.
More you discuss; more tax planning would emerge.
.