Capital Gains Tax on legal heirs

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Krishnan (Querist)
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04 March 2020 I recently sold my father's house, who expired a year back. We are four legal heirs (mother, myself, my two brothers) to that property. On selling the property, I asked the buyer to make the payment fully to my mother's bank account itself. On computing the capital gains using indexation, it comes to around 8 lakhs. Sale deed to buyer was executed by all of us but in the sale agreement, there is a statement that says the payment was made to my mother as per our request. I have got below queries with regard to payment of capital gains tax. Please clarify.

1. Since the sale value is posted to my mother's account, is it ok if my mother pays capital gains tax @ 20% on 8 lakhs?
2. Even though my mother got the amount, as legal heirs, from capital gain tax perspective, do we have to split the capital gains as 2 lakhs between us and pay 20% capital gains tax that amount by each of us individually?
3. If both approaches are acceptable by law, which is the safest approach that would not result in any queries from IT department?

Eswar Reddy S

Eswar Reddy S (Expert)
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05 March 2020 She may get the notice based on AIR.They may raise the query that you made the arrangement to evade the tax.. However you can show the documents available..

VIJAY KUMAR

VIJAY KUMAR (Expert)
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05 March 2020 In my view, you can not do that, any kind of arrangement can not supersede the law, as the share of each member is distinct, each one should pay tax of their part.

Krishnan

Krishnan (Querist)
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05 March 2020 Thanks Eswar and Vijay for your response. Based on your response, I presume the safest approach is to pay taxes individually instead of having my mother pay fully. Please correct me if I misunderstood your response.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 March 2020 Yes, Krishnan. Second approach is better in all respects. I would like to further add here that, the amount of sales consideration has also to be get divided among all the 4 legal heirs. From her bank account , she will pay you and your brothers -25% to each. In turn, you may re-transfer the amount to your mother as Gift or Loan.

Krishnan

Krishnan (Querist)
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06 March 2020 Thank you Paras for your inputs.

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