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Capital gains on property sold belonging to deceased father

JKS (Professional) (52 Points)

03 October 2013

Dear Friends,

Kindly help me:

My clients are four brothers and they have sold a house property purchased and belonging to deceased father. Their mother has also died. The property was not transferred to the sons. No proceedings of inheritance of property were done. The sale deed of the current sale shows that property belongs to the deceased father. But the proceeds were received by the sons in their four separate bank accounts. What shall be the tax treatment. Whether any capital gains tax liability arises for the sons. Please clarify.

Thanks and Regards to all.

JKS

jk_sarker1 @ rediffmail.com

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8 Replies

Mihir (Wealth Manager) (5293 Points)
Replied 03 October 2013

How could the 4 brothers signed the agreement when the property still belonged to their father? There should have been some property document such as Will, Succession Certificate or Letter of Administration.

If the property held by the father is more than 3 years, there shall be long term capital gain for the 4 brothers, and all 4 shall be liable to pay tax and/or avail exemption u/s 54 or 54EC.

1 Like

Mohana Harish (AUDIT TEAM LEAD - CA FINAL) (468 Points)
Replied 03 October 2013

As for as my concern, Hence both the parents are no more. You can ask them to approach an advocate for Final settlement deed among brothers along with their legal heir certificate and register the settlement deed with the local register office. and such portion which is settled by each brothers will be taxable under their hands under capital gains. He can claim exemption u/s - 54 or 54F

T.S.Mohana harish

CA Final

Madurai

1 Like

parasmani pal (study) (33 Points)
Replied 03 October 2013

Calculate capital gain for all son It will automatically trf to them when their parents died for income tax purpose.

1 Like

Ritesh Jain (CA, CS in Job) (675 Points)
Replied 03 October 2013

The treatmment will be like the property was held by four brother..

The will of father will do ....even if it is not there, legal heir affidavit as per law will work..

the acquisition price will the same as in case it was for father(indexation reqd)

1 Like

Haridas Mundhada (msclasses.in) (56 Points)
Replied 03 October 2013

Dear all,

As per my opinion, all the four brother need to take a succession certificate from the court. thereafter the property can be transferred. Unless until they have valid possession say by will, or like. they cannot sell the property.

As they don't have any locustadny

Thank you

1 Like

lovelash (advisor) (25 Points)
Replied 06 October 2013

Hi,since property belongs father(died)and their is no class1heir and their are 4class2heir (as per facts and their is no female) property should be divided equally b/w them(4brothers)however while transfer of property or at the time of sale it would be clarified that transfer becomes valid... if not then treatment would be different otherwise capital gain would be applicable.... Thank you.

1 Like

JKS (Professional) (52 Points)
Replied 10 October 2013

Dear Friends.

Thank you all for your support. As per your suggestion I made further query and my understood and accepted that a succession certificate was executed. The monies received by the four brother has not been invested as yet, the property being of long term nature. They have not deposited any monies under the Capital Gains Account Scheme as yet but two year period post transfer is not yet over. The IT returns are pending. Can they deposit monies in the Capital Gains Account Scheme now and claim exemption or make investment under relevant sections and avail exemption from capital gains. Can the ITRs be filed before such deposit or investment or should it be filed afterwards. Please guide.

Thanks to all in anticipation.

JKS

jk_sarker1 @ rediffmail.com

Mihir (Wealth Manager) (5293 Points)
Replied 11 October 2013

No, you cannot. It would be a mistake if you file your IT returns before depositing the sale proceeds in the capital gain account. You can invest in another property later but before that you need to deposit it in the capital gain account and then file IT returns otherwise the whole amount will be taxable.