Transfer of property to cousin

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Transferring property to a cousin as a gift, without any monetary exchange, can have tax implications. Unlike gifts between immediate family members, a cousin is not typically considered a 'relative' for tax purposes. This means the recipient cousin may be liable for tax on the entire value of the gifted property under specific sections of tax law, even though no sale has occurred. While capital gains tax may not directly apply at the point of gift, the transaction itself can attract tax.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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03 May 2022 Dear Sir,

One of my client is transferring property to his cousin by way of Gift. There is no money transfer in this case nor any sale has been made.

I want to know will there be any long term capital gain impact in such case to either of the parties and whether any tax needs to be paid in this transaction.

Please help me in this matter.

Regards,
Divyesh Jain

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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03 May 2022 While there is a specific exemption to tax on gifts received from specified relatives, 'cousin' does not fall within the definition of 'relative'. Accordingly, gift received from your client shall be taxable in cousin's hands.
Entire value of the property is taxable.
Capital gains tax not applicable.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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03 May 2022 But there is only transfer of ownership. No sale has taken place. How will the tax calculation be done since there is no capital gain. I feel it must be taxed only when the cousin sells the property.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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03 May 2022 Transfer of property without considering attracts tax.
Section 56(2)(x) provides that following receipts shall be taxed in hands of any person where received from any person or persons on or after 01.04. 2017 during any previous year. (a) Any sum of money exceeding Rs. 50000 in aggregate without consideration.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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03 May 2022 Ok Sir. Thanks for your valuable response.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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03 May 2022 Check added reply also.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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03 May 2022 Yes.. Will see the section

DIVYESH JAIN

DIVYESH JAIN (Querist)
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06 May 2022 Is there any way to save this tax by investing in infrastructure bonds or somewhere else as it is available incase of Capital gain on sale of property.

Please advise.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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06 May 2022 Do two transfer between one to father 's brother and further transfer to his son.
Check all such transfer falls within relative under income tax.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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06 May 2022 Ok, Thanks a lot Sir for your guidance.

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