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Tax implication on gift of house property

saurabh keshan (Analyst Tax) (28 Points)

14 December 2015

Hi my wife has purchased a House Property ( lets call it house NO 1) on June 2015 for 1cr. and my Own brother's wife is having a House Property ( Lets Call it House no 2) which she wants to sell for 50 lacs capital gains worked out to 40 lacs approx.

Now my question is can my brother's wife gift the house no 2 to my wife without consideration and then my wife sell's the same to claim exemption u/s 54.

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7 Replies

Ramanathan (Article) (40 Points)
Replied 18 December 2015

Dear Saurabh,

Transfer of house property between the releatives are exempt from tax. Your wife and your brothers wife will not be called as relatives as per it act 1961. therefore if the house is transfered without any consideration, then your wife has to pay tax on the house received without any consideration because the Fair market value or the stamp duty value exceed Rs 50000.
after she admits it as her income then she can sell that house property and claim decuction u/s 54 (Considering that the house was held for a period of 3 years or more by your brothers wife & your wife together or individually)

House property 1 will not affect the section 54 deduction for house property 2.
If there is anything else pls let me know.

Thank & regards

saurabh keshan (Analyst Tax) (28 Points)
Replied 18 December 2015

hi sir as per section 56(2)(VII) following are relatives

Relatives u/s 56(2)(vii) from whom Gift is permissible under Income Tax Act, 1961

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) brother or sister of either of the parents of the individual;

(v) any lineal ascendant or descendant of the individual;

(vi) any lineal ascendant or descendant of the spouse of the individual;

(vii) spouse of the person referred to in clauses (ii) to (vi)

reading point (iii) and (Vii) together

Ramanathan (Article) (40 Points)
Replied 18 December 2015

Dear Saurabh,

What you have posted is correct, the above provision needs to be looked at from the individual point of view.
So how will your wife be releated to your brohters wife?

As per what you had pointed ie point (iii) & (Vii) is from your point of view. you will be considered as relative for your brothers wife and vise verse.
But not your wife and your brothers wife.

saurabh keshan (Analyst Tax) (28 Points)
Replied 18 December 2015

Hi Sir,

but we have to see from my wife's point of view since she is the owner of house property and i am her spouse(point no iii) and my brother wife is relative as per income tax act 1956.(point No (vii)