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Longterm capital gains on gifted landed proprties

27 November 2018

My brother purchased 2 residential pliots during1.in1987&2.in2006.He has made settlement to his wife who is uneployed/housewife and have no income,no house property in her name.Now she has sold the two properties and propose to invest the entire sale proceeds to puurchase a flat jointly with her son,who is going to avail bankloan for this purpose.Kindly advise the amount invested in this purchase of flat is fully exempted from LTCG tax.

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9 Replies

shrey salecha (51 Points)
Replied 27 November 2018

Firstly calculate capital gain and to exempt you have to invest it in purchase or construction on residential property.
It is advisable that you should not take loan (for the amount of LTCG that is to be invested).
You should purchase the said property one year before the transfer or construct the said property within 3 years from the date of transfer of old property.

S.SAMBATHU (RETIRED) (98 Points)
Replied 27 November 2018

Do you mean to say that she they should not avail loan or the loan availed should not exceed cost of new flat - sale value

shrey salecha (51 Points)
Replied 27 November 2018

I mean to say that the amt of LTCG that is to be invested should not be taken as loan.

Z ( ) (2960 Points)
Replied 27 November 2018

Originally posted by : Sambath Sundararajan
	My brother purchased 2 residential pliots during1.in1987&2.in2006.He has made settlement to his wife who is uneployed/housewife and have no income,no house property in her name.Now she has sold the two properties and propose to invest the entire sale proceeds to puurchase a flat jointly with her son,who is going to avail bankloan for this purpose.Kindly advise the amount invested in this purchase of flat is fully exempted from LTCG tax.

Please elaborate on the bolded text.

Clubbing provisions might be applicable.

MOHAMMED IMRAN (1020 Points)
Replied 27 November 2018

exemption u/s54F any asset other than residential house property ,
purchase one residential house property 1yr before or two years after transfer /construct one house property within 3yr
proportionate capital gain is exempted

u/s54 LTCG from sale of residential house property purchase /construct one residential house property
exemption -LTCG or investment whichever is lower

Sambath Sundararajan (18 Points)
Replied 27 November 2018

I specifically want to know,if the new flat is to be purchased in joint name with her son is eligible for ltcg exemption.

madhav (ca) (72 Points)
Replied 28 November 2018

purchase of new flat in joint name is not eligible for ltcg exemption

(Guest)

I am assuming that settlement is after divorce.

Transaction 1: getting Alimony as assets:Any asset transferredwithout consideration to spouse is tax-free in the hands of the recipient. (When marriage exists)
However, after divorce, any asset transferred to the ex-spouse without consideration, would be a gift from a non-relative and would have tax implications for the recipient spouse.

Transaction 2: selling of the 2 plots:

a) Any income from the assets gifted prior to divorce could be clubbed with the transferring spouse till the marriage exists. After divorce, any subsequent income from these assets would be taxable in the hands of the recipient spouse. The cost of acquisition is deemed to be the cost at which the previous owner (ex spouse) bought it.

b) In case full amount of net consideration (not only the gain) is invested in purchase / construction of residential house, then, the full amount of long term capital gain would be exempted under section 54F.

otherwise proportionate amount of exemption can be calculated on the basis of following formula –

Exemption under section 54F = Long term capital gain x Amount re-invested / Net consideration

d) In my view 54F can be claimed for constructing the same house with the net consideration of both plots. New Delhi v Mohinder Kumar Jain IT APPEAL NO. 5254 (DELHI) OF 2014

e)Though the Supreme Court of India, in Bajaj Tempo Ltd., [TS-3-SC-1992-O] held that‘The Statute should be construed liberally for the purpose of deductions, the recent Delhi ITAT decision in the case of Kaushal Kishore Maheshwari vs ACIT[TS-6590-ITAT-2017(DELHI)-O] attempts to establish a direct nexus between the net consideration received and the reinvestment made. So its better to invest in assessee's name using the sale proceeds

Sambath Sundararajan (18 Points)
Replied 28 November 2018

In this conversation no diverce has taken place/any thought of diverce .The proceeds of gifted proceeds is rs.1.8 crores.The amount of new flat to be purchased is rs.2.5crores.The entire amount is going to be invested into this project.Since the full sale proceeds are not sufficient for the purchase of new flat,and the assasse is a housewife with no income,she is going for bank loan,in joint names with her son who is an earning member.They are going to apply loan for rs.0.7crore only,for the shortfall,and going purchase the new flat in join names.So kindly explàin for ltcg exemption. .