Gifting of house property - sec 54 non compliance

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This query is : Resolved

Zaid Patanwala (Querist)

28 January 2014 Dear sir,

I would like to know the consequences of non compliance with Sec 54 in the below circumstance;
Mrs. A (mother) sold a residential house and purchased another house property thereby claiming exemption U/s. 54. Within a period of 6 months of such transfer, she gifted the property to Mr. B (her son) & hence non compliance with the requirements of Sec 54.

In the above case, what will be the consequences;
1) Whether Mrs. A will have to pay the tax amount immediately on gifting of the property.
2) Will Mr. B be liable to pay the same in the event Mrs. A expires
3) Will Mr. B be allowed to claim the cost of acquisition of such property in the event that Mr. B sells the same after few years.

Please advice.

CA Mohit Bansal

CA Mohit Bansal (Expert)

29 January 2014 Hi Zaid,

The exemption gets withdrawn if the new residential property is SOLD and not when it is gifted to relative.

So, answers of the above questions are:
1) No, Mrs. A is not liable to pay tax amount
2)No, Mr. B is not liable to pay on event of Mrs. A death
3)Yes, Mr. B allowed to take the COA of the property as the same COA which was in the hand of Mrs. A

Zaid Patanwala

Zaid Patanwala (Querist)

29 January 2014 Dear Mohit,

Thanks for your advice.

However Sec 54 gets contravened when the owner relinquishes his/her right over the property. Since Mrs. A will relinquish her right by gifting the house property, it will contravene Sec 54.

Please evaluate in light of the above.

CA Mohit Bansal

CA Mohit Bansal (Expert)

29 January 2014 In section 54, it is no where written about relinquishment of title, it only speaks about the sale of property

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