Capital gains tax

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An 85-year-old father sold land and wants to distribute the proceeds equally among his three children. The initial query asked if the children could invest the money in property in their own names to benefit from capital gains tax exemptions. The advice given is that this is unlikely to be allowed. Instead, the father should invest in a house property himself, which can offer exemptions under sections 54 or 54F, and then gift the property to his children, as gifting is not considered a taxable transfer.

janakiramg

janakiramg (Querist)
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13 March 2021 My father (85 years old ) has sold land in 2021 which was acquired in 2003. He has three children. He is not interested in investing in any property in his own name. He wants to give sale proceeds to children equally. If children invests same in construction of their own house/buy a flat or land in their own name as per timelines, will this be allowed under capital gain tax. Kindly clarify.
If above is not possible, what is best way of investing sale proceeds. Kindly suggest.
Thanks

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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15 March 2021 No, investing by children cannot avail the benefit of exemption u/s 54 or 54F. Let your father invest in a house property. After that he can gift the property to his children.

Watch this video https://www.youtube.com/watch?v=ZFyMR2VyxyE

janakiramg

janakiramg (Querist)
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21 March 2021 Sir,
Thank you for quick response.
I have read following article in the internet. Kindly go through it and advise me how far is it relevant in my case.

Purchase of Property in the name of Son eligible for Capital Gain Exemption: ITAT
https://www.taxscan.in/purchase-property-name-son-eligible-capital-gain-exemption-itat/51948/
https://www.google.com/amp/s/www.taxscan.in/purchase-property-name-son-eligible-capital-gain-exemption-itat/51948/%3famp

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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21 March 2021 I have gone through the link you send. Thank you for such kind of new information. However, it seems that ITAT decision is an aberration from the settled law. You may risk and try your luck. ITAT decisions are bound to struck down by the HC always.

Your father can purchase house property in his name (max two houses u/s 54 upto Rs. 2 crores exemption) and can gift to you immediately. Gift is not a transfer u/s 47.

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