Transfer liable to capital gain
This query is : Resolved
11 January 2016
If member of huf transfer an capital asset to huf as gift , shall it be treated as transfer under section 2(47)...?
If rent received from leting such capital asset being house property, rent shall be clubbed in hands of such member .What if huf sold such an asset and arises capital gain, what is cost of acquiision to huf and in whose hand capital gain will be chargeable to tax...?
14 January 2016
It will not be transfer since it is gifted without consideration. If rent is received from letting of gifted property the same shall be clubbed in the hands of member who gifted. If capital gain arises it will also be clubbed and for calculation of capital gain cost of acquisition and period of holding shall be as per the previous owner i.e. the member who gifted it.
15 January 2016
Thank you Abhishekji ,
In which type of cases, cost of acquisition shall be considered as cost to previous owner and stamp valuation when property received without considration...?
16 January 2016
Please refer section 49 of Income Tax Act
16 January 2016
So it means that
Say mr.x has purchase house in year 2010-11 for Rs.100000 and transfer it to mr.y without consideration as gift in 2015-16 (stamp value Rs. 500000) . Tax consequences will be :
Case-I If mr.x is relative of mr.y then cost of acquisition to mr.y will be Rs.100000 i.e., cost to mr.x as it was not subjected to tax u/s 56(2)(vii).
Case-II if mr.x is friend of mr.y then cost of acqusition to mr.y will be Rs 500000 i.e., stamp value as it was subjected to tax u/s 56(2)(vii).
Am i right...?
02 August 2025
Yes, you're absolutely right in your understanding. Here's a structured clarification of the **tax implications** in both the scenarios you've described, based on **Section 49** and **Section 56(2)(vii)/(x)** of the Income Tax Act:
---
### ✅ **Relevant Legal Provisions:**
1. **Section 49(1)**:
If a capital asset is acquired by way of **gift, will or inheritance**, the **cost of acquisition** for computing capital gains shall be **the cost to the previous owner**.
2. **Section 56(2)(vii)/(x)**:
If an individual or HUF receives a **gift of immovable property without consideration** and the **stamp duty value exceeds ₹50,000**, it is taxed as **income from other sources**, **unless received from a relative** or covered under other exceptions.
---
### 🧾 Case Scenarios:
---
#### **📌 Case I: Mr. X gifts the house to Mr. Y (his *relative*)**
* **Transfer** is not regarded as income under section 56(2)(vii)/(x) because it is **received from a relative**.
* **No tax in hands of Mr. Y** upon receipt.
* When Mr. Y **sells the property**, **Section 49(1)** applies →
➤ **Cost of acquisition** = ₹1,00,000 (cost to Mr. X)
➤ **Holding period** of Mr. X is also counted → May qualify for LTCG
---
#### **📌 Case II: Mr. X gifts the house to Mr. Y (*not a relative*)**
* **Section 56(2)(vii)/(x)** applies because the property is received **without consideration** and from a **non-relative**.
* **Mr. Y is taxed on ₹5,00,000** (stamp duty value) as **income from other sources** in the year of receipt.
* For capital gains computation when Mr. Y sells:
➤ **Cost of acquisition = ₹5,00,000** (FMV taxed under section 56)
➤ Holding period starts from date of receipt by Mr. Y
---
### 🧾 Summary Table:
| Particulars | From Relative (Case I) | From Non-Relative (Case II) |
| ------------------------------ | ----------------------- | --------------------------- |
| Taxable in hands of recipient? | ❌ No | ✅ Yes (u/s 56) |
| Cost of Acquisition for CG | ₹1,00,000 (cost to X) | ₹5,00,000 (stamp value) |
| Holding Period for CG | Includes Mr. X’s period | Starts from Mr. Y’s receipt |
---
### 🔁 Capital Gain on Sale by HUF (in case of HUF receiving gift from member):
* Gift **by member to HUF is exempt** under section 56(2)(x).
* **Income from the asset (e.g. rent)** is **clubbed in hands of member** per **section 64(2)**.
* On sale by HUF:
➤ **Capital Gain taxed in hands of HUF**,
➤ But still **clubbed in member's hands** under **section 64(2)**.
➤ **Cost of acquisition = cost to original member** (per section 49)
---
If you want help with tax calculation or drafting a compliant transfer deed, feel free to ask.
---
### ✅ **Relevant Legal Provisions:**
1. **Section 49(1)**:
If a capital asset is acquired by way of **gift, will or inheritance**, the **cost of acquisition** for computing capital gains shall be **the cost to the previous owner**.
2. **Section 56(2)(vii)/(x)**:
If an individual or HUF receives a **gift of immovable property without consideration** and the **stamp duty value exceeds ₹50,000**, it is taxed as **income from other sources**, **unless received from a relative** or covered under other exceptions.
---
### 🧾 Case Scenarios:
---
#### **📌 Case I: Mr. X gifts the house to Mr. Y (his *relative*)**
* **Transfer** is not regarded as income under section 56(2)(vii)/(x) because it is **received from a relative**.
* **No tax in hands of Mr. Y** upon receipt.
* When Mr. Y **sells the property**, **Section 49(1)** applies →
➤ **Cost of acquisition** = ₹1,00,000 (cost to Mr. X)
➤ **Holding period** of Mr. X is also counted → May qualify for LTCG
---
#### **📌 Case II: Mr. X gifts the house to Mr. Y (*not a relative*)**
* **Section 56(2)(vii)/(x)** applies because the property is received **without consideration** and from a **non-relative**.
* **Mr. Y is taxed on ₹5,00,000** (stamp duty value) as **income from other sources** in the year of receipt.
* For capital gains computation when Mr. Y sells:
➤ **Cost of acquisition = ₹5,00,000** (FMV taxed under section 56)
➤ Holding period starts from date of receipt by Mr. Y
---
### 🧾 Summary Table:
| Particulars | From Relative (Case I) | From Non-Relative (Case II) |
| ------------------------------ | ----------------------- | --------------------------- |
| Taxable in hands of recipient? | ❌ No | ✅ Yes (u/s 56) |
| Cost of Acquisition for CG | ₹1,00,000 (cost to X) | ₹5,00,000 (stamp value) |
| Holding Period for CG | Includes Mr. X’s period | Starts from Mr. Y’s receipt |
---
### 🔁 Capital Gain on Sale by HUF (in case of HUF receiving gift from member):
* Gift **by member to HUF is exempt** under section 56(2)(x).
* **Income from the asset (e.g. rent)** is **clubbed in hands of member** per **section 64(2)**.
* On sale by HUF:
➤ **Capital Gain taxed in hands of HUF**,
➤ But still **clubbed in member's hands** under **section 64(2)**.
➤ **Cost of acquisition = cost to original member** (per section 49)
---
If you want help with tax calculation or drafting a compliant transfer deed, feel free to ask.
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