Advice requested - capital gains on sale of property - Income Tax

shankar (CA, CS Final) (243 Points)
Replied 22 June 2012

Dear Karthik,

Thumb Rule of applicability of capital gain is there should be transfer of capital assets.

But as per Sec. 47 "Trasaction not regared as transfer" - Any trasfer of capital assets under a gift or will or an irrevocable trust shall not be consider as transfer.

So therefore the qustion of capital gain will not arise in ur case since the property transfered under the will.

Thanks

Shankar

CA. SUDHARSAN K G (Chartered Accountant) (472 Points)
Replied 22 June 2012

Any transfer of a capital asset under a gift or a will does not attract provisions of capital gains tax. Dont think that the Income Tax Act will let you get away. If the inheritor were to eventually sell the property, capital gains tax would come in the

CA. SUDHARSAN K G (Chartered Accountant) (472 Points)
Replied 22 June 2012

In my view your query:- a: how do we decide on the capital gain. what is the tax liability. Net Sale Consideration Less: Indexed cost of Acq Imp b: what if the documentary proof for Rs. 4,00,000 (or part of it) is not available. You may arrange it by way of agreement with the person took incharge of construction or such other manner... c: do we calculate the tax liability jointly, or individually for the 4 sisters. Generally it is based on proportion mentioned in the will. In the absence of above it may be taken equally or in the ratio of consideration received by them. Request advice in the matter

CA. SUDHARSAN K G (Chartered Accountant) (472 Points)
Replied 22 June 2012

Karthik hope u got answer... You may join us at fb.com/thecastudent

Karthik Kashyap (CA Final, CS Final) (26 Points)
Replied 24 June 2012

Thanks for the replies.

But what I was actually looking at was the calculation of capital gains when the property is sold in 2012 by the four joint owners.

When the property is sold for Rs.20 lakhs, (equally distributable to all 4 ), for calculation, what year do we consider as year of acquisition - 1986 or 2008. And what value of the property is to be considered - the initial value of construction, Rs. 4 lakhs or the property value in 2008 at the time of transfer, (the market value?).{ No improvements to the property has been made since construction.}

CA. SUDHARSAN K G (Chartered Accountant) (472 Points)
Replied 26 June 2012

The property is sold for Rs.20 lakhs, (equally distributable to all 4 ), for calculation, what year do we consider as year of acquisition - 1986 or 2008? 1986 And what value of the property is to be considered - the initial value of construction, Rs. 4 lakhs or the property value in 2008 at the time of transfer, (the market value?). { No improvements to the property has been made since construction.} General computaion: sale consideration - Rs. 20,00,000/- less: indexed cost of allotment(1986) - Rs. 20,000 /- less: indexed cost of construction of house(1998) - Rs. 4,00,000 /- In your case you have to take 25% on all of the above.

Pucca Idiott (wannabe...) (148 Points)
Replied 26 June 2012

The transfer between Mrs X and their children is a free tranfer and not covered under the ambit of Capital Gains but susequently when the children sell the property it is definitely taxable and for the purpose of calculation Sale considn will be Rs.20lacs and not its 25%. The tax has to be computed on the entire amount coz its subsequent distribution in four hands is merely diversion of income. If you take 25% and calculate the CG tax on that the exchequer will have to suffer coz it will have to allow 4 basic exemption limits for one transaction.