Section 56 x deem gift in case of formation of a trust.

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This discussion explores how an individual can transfer a significant immovable property into a trust, particularly when they have no close relatives, to ensure its security after their lifetime. The primary concern is avoiding capital gains tax under Section 56(2)(x) during the transfer. It is suggested that transferring to an existing charitable trust or forming a new one under Section 12A/12B of the Income Tax Act might circumvent these provisions. However, it's clarified that charitable trusts are generally for public benefit, not private non-blood relatives or heritage property maintenance, especially if a business is involved.

Sameer Yadav

Sameer Yadav (Querist)
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04 February 2021 A person want to form a trust with a property where a huge immovable property has to be transferred into it. The person transferring the property has no known relatives. How can he make sure he secured the property after his life time. In case he transfers it by way of creating the trust in his life time. How he makes sure the transfer does not attract section 56 x and he avoids paying capital gains

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 February 2021 Transfer it to a existing charitable trust or form a charitable trust under section 12A/12b of the income tax act deemed gift provisions not applicable.

Sameer Yadav

Sameer Yadav (Querist)
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04 February 2021 Can a charitable trust be created privately for non blood relatives and Maintanance of heritage property. In case business is run in it. How will that be managed

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 February 2021 No, it can be created for public charity only.

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