Taxabilty
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
12 December 2013
IF AN INDIVIDUAL DONATES HOUSE PROPERTY TO A TRUST THEN WHAT WILL BE THE TAXABILITY OF HOUSE PROPERTY IN HANDS OF
A) DONOR
B) TRUST
A) DONOR
B) TRUST
CA Hardik Bunha
(Expert)
12 December 2013
for trust - it is not chargeable to tax. as it is a capital asset and capital receipt is not chargeable to tax.
for donor - not chargeable to tax .
for donor - not chargeable to tax .
Message likes :
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Querist : Anonymous
Querist :
Anonymous
(Querist)
12 December 2013
WHAT IS THE RELATED SECTION TO IT?
26 July 2025
Sure! Here’s the detailed tax treatment with relevant sections:
---
### Taxability when an individual donates a house property to a trust:
---
### A) In the hands of the **Donor (Individual)**:
* **Nature of transfer:** Donation of house property is a **transfer** under **Section 2(47)** of the Income Tax Act.
* **Capital Gains:**
* Since it is a donation (without consideration), it is treated as a **transfer without consideration**.
* As per **Section 47**, certain transfers are not considered transfers for capital gains. But donation is **not** covered in Section 47, so capital gains arise on donation.
* **Capital Gains Tax:**
* Donor has to pay capital gains tax on the **fair market value (FMV)** of the property on the date of donation, minus cost of acquisition.
* If held for more than 24 months, long-term capital gains (LTCG) applies with indexation benefit (Section 48).
* **However, if the donation is to a charitable trust registered under Section 12AA/12AB and the trust is eligible under Section 80G**, then the donor can claim deduction under **Section 80G** for the value of the donation (subject to limits).
---
### B) In the hands of the **Trust**:
* **Capital Receipt:**
* Receipt of house property as a gift/donation is **not income** for the trust; it is a **capital receipt**.
* So, the trust **does not pay tax on receipt of the property**.
* **Taxability of Income from Trust:**
* If the trust uses the property for charitable purposes, income from the property is exempt under **Section 11 and 12** subject to conditions.
* If the property is used for non-charitable purposes or rented out, income will be taxable.
---
### Relevant Sections:
| **Section** | **Description** |
| ----------- | ---------------------------------------------- |
| **2(47)** | Definition of transfer, includes donation |
| **47** | Exemptions from transfer (donation not exempt) |
| **45** | Capital gains on transfer |
| **48** | Computation of capital gains (indexation) |
| **80G** | Deduction for donations to charitable trusts |
| **11, 12** | Exemption of income of charitable trusts |
---
### Summary:
| Party | Taxability | Reference Section |
| ----- | --------------------------------------------------------------------- | ---------------------- |
| Donor | Capital Gains on FMV of property on donation date | Sections 2(47), 45, 48 |
| Trust | No tax on receipt; income taxable if used for non-charitable purposes | Sections 11, 12 |
---
If you want, I can help you draft a detailed example or letter explaining this with case law references. Would you like that?
---
### Taxability when an individual donates a house property to a trust:
---
### A) In the hands of the **Donor (Individual)**:
* **Nature of transfer:** Donation of house property is a **transfer** under **Section 2(47)** of the Income Tax Act.
* **Capital Gains:**
* Since it is a donation (without consideration), it is treated as a **transfer without consideration**.
* As per **Section 47**, certain transfers are not considered transfers for capital gains. But donation is **not** covered in Section 47, so capital gains arise on donation.
* **Capital Gains Tax:**
* Donor has to pay capital gains tax on the **fair market value (FMV)** of the property on the date of donation, minus cost of acquisition.
* If held for more than 24 months, long-term capital gains (LTCG) applies with indexation benefit (Section 48).
* **However, if the donation is to a charitable trust registered under Section 12AA/12AB and the trust is eligible under Section 80G**, then the donor can claim deduction under **Section 80G** for the value of the donation (subject to limits).
---
### B) In the hands of the **Trust**:
* **Capital Receipt:**
* Receipt of house property as a gift/donation is **not income** for the trust; it is a **capital receipt**.
* So, the trust **does not pay tax on receipt of the property**.
* **Taxability of Income from Trust:**
* If the trust uses the property for charitable purposes, income from the property is exempt under **Section 11 and 12** subject to conditions.
* If the property is used for non-charitable purposes or rented out, income will be taxable.
---
### Relevant Sections:
| **Section** | **Description** |
| ----------- | ---------------------------------------------- |
| **2(47)** | Definition of transfer, includes donation |
| **47** | Exemptions from transfer (donation not exempt) |
| **45** | Capital gains on transfer |
| **48** | Computation of capital gains (indexation) |
| **80G** | Deduction for donations to charitable trusts |
| **11, 12** | Exemption of income of charitable trusts |
---
### Summary:
| Party | Taxability | Reference Section |
| ----- | --------------------------------------------------------------------- | ---------------------- |
| Donor | Capital Gains on FMV of property on donation date | Sections 2(47), 45, 48 |
| Trust | No tax on receipt; income taxable if used for non-charitable purposes | Sections 11, 12 |
---
If you want, I can help you draft a detailed example or letter explaining this with case law references. Would you like that?
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