Property giving as gift to spouse

vishnupriya (CA Final) (1418 Points)
Replied 26 December 2011

For your first question:

The purchased property is to be disclosed (mentioned) in Balance sheet ( not in return) of your wife. There will be no income tax on this transaction unless you sell the property.

For your second question:

Actually when there is a sale of residential house, the long term capital gains of 516860/- [1500000 - (650000 x 785/519)] is taxed @ 20% + Education cess @ 3%.

Tax Planning:

Income from Capital Gains: 516860/-

Less: Principle Repayment of Housing Loan U/s 80C 100000/-

(allowed upto 100000/- only, only principle portion not interest)

.................................

Net Taxable Income 416860/-

Less: Basic Slab -250000/-

...................................

Tax @ (20% +3%) 34370/-

In order to avoid such tax, the entire sale consideration received is to be invested U/s 54F, by acquiring another new residential property within 2 years from the date of transfer in case of purchase (within 3 years in case of construction).

Such amount can be deposited in Natioanalised Bank under Sec 54 Schemes. If the deposited amounts are not utilised or misutilised or partially utilised, the entire capital gain tax is attracted with interest.

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vishnupriya (CA Final) (1418 Points)
Replied 26 December 2011

In case of repayment of Hosing Loan, you can choose either Pf Loan or Hosing loan repayment but the maximum exemption available under 80 C is 100000/-, So I ignored PF Loan.

There is provision to get exemption for interest on repayment of housing Loan U/s 24 B, Under 24 B You can claim upto150000/-. But you have not provided the details of interest.Please see below link to understand Sec 24 B

https://www.fingyan.com/income-tax-it-benefits-on-home-loan-housing-loan-mortgage-in-india/

I assumed the age of your Uncle is more than 60 years, so the basic slab for AY 2012-13 is 250000/-. If your Uncles age is above 80 Years the basic slab is 500000/-.

So In my opinion, if your uncle sells the property, tax will be attracted by simply depositing the amount. He has to reinvest to avoid tax.

CA Ketan Waghela (Partner at Elite Educare) (356 Points)
Replied 26 December 2011

Mr. Vamsi,

As you said the land was purchased with your wife’s name.

1. It is advisable to file the return and disclose the asset.

2. Sale of residential house property attracts capital Gain in the hands of transferor. So, if your uncle sells his property then LTCG (Long Term Capital Gain) will be applicable as property is transferred after holding of more than 36 months. The following calculation is to be made:

Sale consideration 15,00,000

(-) Expenses on transfer (if any) (0.00)

Net Consideration 15,00,000

(-) Indexed cost of acquisition (9,83,141)

[6,75,000 * 785 / 519]

(-) Indexed cost of Improvement (if any) (0.00)

Long term Capital Gain 5,16,859

In order to claim exemption u/s 54, it is advisable to make investment in another residential house property within 2 years in case of purchase or within 3 years in case of construction.

The exemption will be lower of:

If the cost of the new house property or LTCG

If the CG in the new property is could not be fully or partly reinvested for the purposes specified in the said section then it should be deposited with the special bank under capital gain scheme account and not in the FD. (FD will not give any tax relief and will attract tax)

If the CG is not reinvested and if you uncle is a senior citizen then the basic exemption limit (0% tax) is 2,50,000/- and 5,00,000/- if he is a super senior citizen. So, in either case tax will be levied @ 20%.

Home loan & Interst: Deduction u/s 80C can be claimed upto 1,00,000/- for the principal amount. Interest on loan can be claimed upto period of transfer upto 1,50,000/-

Vishnupriya ji, sec.54F deals with transfer of long term asset other than residential house. So, exemption can be claimed u/s 54 and not u/s 54F as residential house property is being transferred.

Members, please correct me if I’m wrong.

vamsi mattupalli (Sr. System Analysts) (27 Points)
Replied 27 December 2011

Appreciates your responses.

1. Can we declare now as assest since we didn't disclose in 2010-11 F.Y. if so what are fees/penalities/taxes leived on us and how to do that?

2. Answers seems to be bit confused me. my understand on responses is that my uncle has pay capital gain tax ( 20% + 3%) on 516860. And remaining 9.83 lac he can FD with his wife name, correct me if i am deviating or misunderstood.

Thanks

Vamsi M

vamsi mattupalli (Sr. System Analysts) (27 Points)
Replied 27 December 2011

1. One more thing, she is also working and we didn't have prepared any balance sheet and/or haven't other sources of incomes. still we need to prepare balance sheet and if so what are things we have keep in assests and in liabilities sides.

vishnupriya (CA Final) (1418 Points)
Replied 27 December 2011

@ Vamsi Sir,

I advise you to please consult a chartered accountant, anyway I am now clarifying your doubt.

Actually for salaried employees, there is no need to file personal balance sheet and disclose the assets & liabilities in the return under the Income tax Act. The chartered Accountants just prepare the personal Balance sheets and maintain a record/file with them, to avoid future problems, if the clients receives any notices from Income tax Department. So there is no need to disclose in return, if you consult a CA they will just prepare a Balance sheet of previous year also.

After paying capital gain tax, your Uncle can do whatever he want to do with that amount, yes he can make FD also....

vamsi mattupalli (Sr. System Analysts) (27 Points)
Replied 27 December 2011

Thanks Vishnupriya, will consult CA as per your advise.

Vikas Shukla (Executive) (27 Points)
Replied 07 January 2012

Dear sir,

Could you please help and guide me on below matter?

My wife purchased a property / vacant land in 2002 for Rs. 2 lac. on G.P.A. by its original owner. No Sale Deed was done on that time. In year 2008 as a safety, my wife felt better to get the property registered through Sale Deed, hence made a Sale Deed in the name of her husband / me for sale value of Rs. 250000/-. You know as per a rule, GPA owner can not get the Sale Deed done in her own name, so ‘Sale Deed was done in my / husband’s name. Since it was only a documentary formality, value was declared only Rs. 250000/-.

I wish to know whether this transaction of property between 'Wife & Husband' can be treated as ‘Gift’ to Spouse ? with no Tax liabilities, or will effect on any Tax liability and called as Long Term Capital Gain to Wife? She mentioned this in Balance Sheet already. We both are Income Tax Assessee. How should we treat this matter?

Can I know what is the exact ruling of income tax deptt. in such cases for property transaction in relatives/ wife- husband. or any previous court references of same cases?

Please advise, I shall be thankful,

Best regards,

Vikas

9810785682

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 07 January 2012

GPA stands for general power of attorney, where the GPA works as a pure agent, all the transactions are done on behalf of original buyer/seller through GPA,

as she was GPA, so the amount was paid through your account only, hence you are the owner,

regarding the valuation, we are afraid that the valuation taken for stamp duty purpose would be taken by incometax for COA of the property.

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