Capital gain
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
14 May 2016
My uncle is a salaried income assessee and retired now he is thinking of . 1. He wants to sell his house at his native place in 1989 and want to gift the proceeds to his son to purchase a flat in Chennai . 2. He will gift the house to his son and his son will sell the house in that case son has to pay Short term capital gain and purchase a flat in chennai .which one will be beneficial for him
14 May 2016
In the first option, if he sells his house at native place he will incur long term capital gains and if he gifts the sale proceeds to his son for purchasing a flat at Chennai he will not get any exemption from LTCG.
In the second option if he transfer the house to his son by way of gift deed, firstly he will have to prepare and register a gift deed for which stamp duty will be payable, secondly when son will sell this house he will incur STCG which will be taxable at normal slab rates and for which there will be no exemption even if he purchases a flat out of it.
Now if he buys flat at Chennai directly in his son's name out of sale proceeds of native house then father will get exemption u/s 54 but that will be tricky because ITO may object that new investment was not made in father's name even though we have judgments of Delhi HC.
Therefore it is better to invest the sale proceeds of old house in buying new flat at Chennai in father's name so that he may get exemption u/s 54 and than later on he may gift the flat to his son by paying appropriate stamp duty.
In the second option if he transfer the house to his son by way of gift deed, firstly he will have to prepare and register a gift deed for which stamp duty will be payable, secondly when son will sell this house he will incur STCG which will be taxable at normal slab rates and for which there will be no exemption even if he purchases a flat out of it.
Now if he buys flat at Chennai directly in his son's name out of sale proceeds of native house then father will get exemption u/s 54 but that will be tricky because ITO may object that new investment was not made in father's name even though we have judgments of Delhi HC.
Therefore it is better to invest the sale proceeds of old house in buying new flat at Chennai in father's name so that he may get exemption u/s 54 and than later on he may gift the flat to his son by paying appropriate stamp duty.
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