Capital gain and taxability

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This discussion clarifies capital gains tax implications when a property, purchased with funds from Mr. X but registered in his spouse and son's names, is sold. The legal owners (spouse and son) are responsible for declaring the capital gains in their respective tax returns. The query also addresses past rental income declared by Mr. X, with the consensus being that a tax re-assessment is unlikely to result in additional liability due to low overall tax implications.

Mohan Kale

Mohan Kale (Querist)
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20 August 2022 Mr.X has been accepting in bank and declaring rent income of a residential property in his personal ROI which was purchased in FY 2017-2018. Now in FY 2021-2022 the said property is sold for financing sons migration to foreign country for higher study and stay. Now when capital gain was required to be calculated, it came to knowledge that the said property's purchase and sale agreements are in the names of spouse and son but purchase was funded by Mr.X by borrowing loan in his name. The entire sale proceeds were received in sons bank account. Under the circumstances, who is legal owner, who and how capital gain to be declared. Please give references of sections, case laws etc.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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20 August 2022 Mr. X's son and spouse are legal owner of the property, the capital gains to be declared in their ITR as per their share in the property.

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Mohan Kale

Mohan Kale (Querist)
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20 August 2022 Thank you sir for the reply. But what happens to the rent income then declared in Mr.X's ROI all these years? Would the same be assessed and taxed in legal owners hand again in case assessment happens? Because, spouse and son having GTI less than basic exemption were not filing their ROI.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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20 August 2022 The tax re-assessment would not yield any extra tax liability, so in general, it may be pardon of.

Mohan Kale

Mohan Kale (Querist)
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20 August 2022 Thank you very much sir.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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20 August 2022 My Pleasure...

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