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Buying flat for my brother

vikas garg (MBA) (131 Points)

24 November 2015

I want to buy new flat for my brother in his own name since he is not financially well. Therefore i have some questions in my mind, it will be great pleasure if u cud help me out in dealing with the issue. My queries are

1. Can i pay to builder directly on brother's behalf? What are tax implications at my end?

2. Shall the flat legally stand on brother's name or my name since payment is done by me?

3. Also income tax will raise query to my brother about whereabouts of funds?

Please please reply to these questions since i have to close the deal urgently. Thanks in anticipation.

Regards

Vikas garg

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7 Replies

CA Goutam Sharma (Chartered Accountant in Practice) (468 Points)
Replied 25 November 2015

1) When you pay directly to builder and can proove the beneficial ownership of the flat together with the proof of transaction, any income from the flat will be charged in your hands. or any deductions will be allowed in your hands and any capital gains will also be charged in your hand if you sale it later on.

2) The legal documents bearing name of your brother will entitle him to be the legal owner of the property. He can sell it, mortgage it, transfer it, execute any deed regarding flat. However, the incidence of income or loss will be borne by you if condition as given above in point 1 exists.

3) If you prove the beneficial ownership of the flat together with transaction, tax authorities will ask for the source of your income and not of your's brother.

4) Note; your query may be dealt otherwise if you can further explain the purpose and objective of such transaction.

(Guest)

u can just gift him the money, draft a gift deed so that ur brother is not under the microscope of tax department.

raghavan (self) (611 Points)
Replied 25 November 2015

Agree with ubaid. Make it irrevocable. Also give that from accounted money. If amt is small u can bring it under partition of family resources. Consult professional s for big amt

(Guest)

agreed raghavan....irrevocable transfer is imperative or else clubbing provisions can apply...

vikas garg (MBA) (131 Points)
Replied 25 November 2015

Thanks for your replies and these are of quite useful to me.

I want to further clarify that since I am already taxed in higher slab I want to show this transaction as my brother's fund but just want to ensure that tax authorities shall not ask my brother about source of funds since as per his IT return his income is very low.

Thanks for your responses....it was very useful.

Please reply urgent.....thanks in anticipation

Vikas

raghavan (self) (611 Points)
Replied 25 November 2015

Vikas initially u revealed that your brother financially not well. Be careful on arrangements within family. Better to pay tax at higher slab or go for tax planning with professional help. Always evidence speak more on tax matters. Anyhow all the best and be happy