Query on capital gains tax

Tax queries 481 views 2 replies

Dixit Jawahar

CA Finalist

444 Points Joined June 2008

Dear Friends,

I have a query on Capital Gains Tax. The following is the text of the query.

Husband has brought a plot of land in his wife's name about 6 years back in Vizag. Now his spouse wants to sell the plot of land and gift the proceeds of sale to her husband who inturn invests the amount received from his wife in the constuction of a residential house in Hyderabad. Please explain the tax implications of this transaction. Gift of a capital asset is covered under section 47(iii) of the Income tax act,1961 and is not regarded as a transfer. So will the gift of money to husaband will attract capital gains tax or will it be charged under the head 'Income from Other Sources'?---Please clarify

Replies (2)

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

wife can sell the property and transfer the money towards construction of new husband at hyd, even in name of husband, there is no bar to use the money towards construction of new house even when the new property is not in her name .

gift to husband will create unfavorable litigations, instead she would pay direct towards the construction.

however we assume that construction will go long, so advised to open a LTCG account of her with joint name of husband, and keep the money there, afterwards use the funds from there towards construction.

C.A. Jignesh N. Mehta

C.A.

1030 Points Joined January 2009

In case of Gifts, There is no tax payable if the same is received from a relative.

In your above case, the amount paid by wife to husband or vice versa would not be covered by Gifts under section 56.

But

yes, the transaction will be covered by Clubbing Provisions u/s 64

1. Husband Gifts Property of Vizag to Wife. Capital Gain on such property will be taxed in hands of Husband.

2. Wife Gifts Money to Husband (Reversal of above gift) will have no effect as husbands money comes back to him. Any income arising from property in hyderabad will be taxed in hands of husband.