Gift Tax Exemption interpretation in case of Property Sale Proceeds

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Deepak Bhide

1 Points Joined January 2025

1. If our father, a super senior citizen aged 87 intends to gift sale proceeds from his property sale for consideration of ₹ 75,00,000 to us, his two sons, would the entire amount be tax free for him as well as to us?

2. CA has calculated ₹ 8,40,000 as the tax on this sale proceeds considering LTCG with indexation benefit @ 20% rate, so if this calculation is correct, and if th ed remaining amount of ₹ 66,60,000 gifted equally to us will be tax free in our respective hands?

Replies (2)

Rama chary Rachakonda

Master in Accounts & high court Advocate

8827 Points Joined December 2011

I'll address your questions regarding the tax implications of gifting sale proceeds from your father's property sale.

Tax Implications for Your Father Long-Term Capital Gain (LTCG) Tax Since your father is selling a property, he'll be liable for LTCG tax.

The CA's calculation of ₹8,40,000 as tax on the sale proceeds, considering LTCG with indexation benefit @ 20% rate, seems correct.

Tax-Free Gift After paying the LTCG tax, your father can gift the remaining amount to you and your brother.

As per the Income Tax Act, 1961, gifts to relatives, including sons, are exempt from tax under Section 56(2)(v).

Tax Implications for You and Your Brother Tax-Free Gift Receipt As you and your brother are receiving the gift from your father, the amount received will be tax-free in your respective hands.

No Tax Liability You and your brother will not have any tax liability on the gifted amount, as it's exempt under Section 56(2)(v).

Important Considerations Gift Deed It's recommended to execute a gift deed to formalize the gift and avoid any potential disputes. Tax Compliance Ensure your father complies with the tax laws and files the necessary tax returns, reporting the LTCG and

Nikhil Kaushik

Fellow CA

86871 Points Joined June 2009

if you have not already sold the flat, a better way to gift would be to just gift the property to you instead of gifting you the sale of the proceeds. This way, as long you are not need of urgent cash, the asset continues to be with you both equally without unnecessary upfronting of the tax liability.