Dear Colleagues/Friends,
Another hypothetical doubt with regard to the applicability of CG tax under the circumstances described below:
Mr. A is a retired state government employee aged 65 owning a house propoerty in India. A also happens to be a pensioner but not an IT assessee. Mr. B is the son-in-law of A working in a private company as an NRI in one of the GCC countries. Mr. B is also not an IT assessee as he is not having any income within India.. He too owns a house property in India.
Mr. A decides to sell his property and invests the resulting capital gains in a new flat to be purchased in India. The cost of the new flat being very high, in addition to investing the sale proceeds from his house property, he also requires a housing loan from a lender. However his pension being very small, he wants his son-in-law to avail the loan (son-in-law being the principal borrower and he being either a co-borrower or a guarantor to the loan) and proposes to purchase the new flat in the joint names of both him and his son-in-law. Other than to facilitate getting a loan against the new flat, his son-in-law does not invest any money in the new flat. Whether Mr.B by virtue of availing the loan as a principal borrower will be considered to have invested the borrowed amount in the new flat and the sale proceeds from the sale of the house owned by him can be used to pay off the loan is eligible for exemption u/s 54)
Incase if Mr. B would like to invest the capital gains from out of the sale proceeds of his house in purchasing altogether another new flat in his name. (in addition to the flat purchased by his father-in-law is in the joint names of him and his father-in-law)
Whether Mr. B is entitled to claim CG exemption for the flat purchased by him in his name. ( I am sure both A & B can claim CG exemption u/s 54 for the flat purchased by the father-in-law as it is purchased in the joint names)
Another generic doubt is whether banks will be willing to sanction loan in the name of Mr. A as the principal borrower inspite of his limited pension and with Mr. B as the guarantor. (meaning the banks have to get their loan repaid by the guarantor who is an NRI)
Please clarify. Thanks a lot.
Sivaraja
CAclubindia
