Capital gain & tds

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samiksha nagar (Querist)

26 November 2013 sir, in case of transfer of title of property through exchange deed. i need your guidance on following issues:
1- whether it will attract capital gain liability?
2- whether it will attract TDS u/s 194 IA?
3- if, yes then whether on both or on single party?

tulsi kumar soni

tulsi kumar soni (Expert)

26 November 2013 Relinquishment deed:

This document is quite different from a gift deed, though the legal implications are the same. You can use this instrument if you want to transfer your rights in a particular property to another co-owner. Such a transfer is also irrevocable even if it is without any exchange of money. As with all documents related to the transfer of immovable property, a relinquishment deed needs to be signed by both parties and registered.
The stamp duty is similar to that for a gift deed. However there is no discount for relatives, nor are there any tax benefits. Also, both stamp duty and tax will be applicable only on the portion of the property that you relinquish, not on its total value. You can also use this deed to transfer movable property without registration, but it is typically used for immovable property.

Advantages: It allows seamless transfer of your share in a jointly-held property. "This document is most commonly used when a person dies without leaving behind a will and all siblings end up inheriting the property. Unlike a gift deed, you can draw the relinquishment deed for monetary consideration.

Limitations: There are no tax benefits, for as per the tax laws, the term 'transfer' includes relinquishment, not gift. Hence, when you are relinquishing property for monetary consideration, it will result in capital gains for the transferor. "If the consideration is less than the stamp duty value of the property, the difference between the stamp duty and the consideration will be taxed in the hands of the buyer. If you relinquish it without any consideration, the stamp duty value of the property will be its sales price.