LIVE GST Certification Course by CA Arun Chhajer begins 21st April. Register Now!!

Sale of Property

Kumar Krish (AS) (25 Points)

30 June 2011

My wife inherited a property jointly along with her mother and 4 siblings when her father died. The property was sold after 15 years (after it was acquired) and the proceeds were split amongst the 5 folks. My wife's share was credited to our joint account. My wife is a homemaker. When I file a return under HUF how will this inheritance be treated? Will it be considred as Income from sale of property and I will need to pay Capital Gains? Pls. clarify.

Reply
Follow
Share

20 Replies

CA. ANKUR JAIN (CA.....) (2800 Points)
Replied 30 June 2011

Yes, your wife need to pay tax on the capital gains...

and that tax is required to be paid through your wife's return not your huf.. ok

take 1/5th of cost of that property, then compute indexed value of cost and calculate capital gain of your wife...........

Remember to take the exemption limit of Rs. 1,90,000/- in your wife's return ok

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 30 June 2011

make a pan card of her and file her return seperately to claim the benefit,

inheritence is her own right, not of HUF

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 30 June 2011

Originally posted by : aNkuR jAin....................
	Yes, your wife need to pay tax on the capital gains... and that tax is required to be paid through your wife's return not your huf.. ok take 1/5th of cost of that property, then compute indexed value of cost and calculate capital gain of your wife........... Remember to take the exemption limit of Rs. 1,90,000/- in your wife's return ok

agreed

(Guest)

Hi krish

Yes the income from capital gain shall be treated as the income of the HUF. HUF pays tax @ 20.6% on capital gain

The return of income shall be filed by HUF signed by karta (your wife).

The cash will be deposited in the name of HUF.

Now apply to AO for complete partition of HUF. If I am correct the S is 170.

After the assessment by AO of the HUF then you can distribute the income which shall be exempt from tax in the hands of members of HUF. S 10(2).

thanks

S Sivasalapathy (Job) (262 Points)
Replied 30 June 2011

You can claim exemption U/S 54, 54EC...

Navina (Artical) (64 Points)
Replied 01 July 2011

Helo Kaushal Sir ,

But inheritance house propert income, how can HUF calim income for that ?

(Guest)

Hi navina

The house was in the name of the father. Father died leaving legal heirs. Now these properties belong to the legal heirs (co=parcener property). Now this property is sold by legal heirs. This income belongs to HUF. Then they can distribute cash.

NOw take this case. Property is first distributed amonst the legal heirs. This is called inheritence of property. Inheritence is not treated as transfer as per S 47. Now this property is sold by individual members. Capital gain shall arise in the hands of individual members.

please mark the words which krish has written. i am quoting

"My wife inherited a property jointly along with her mother and 4 siblings when her father died. "

It means wife do not have individual rights in the property but a joint right.

Thanks for asking I could explain my view point.

kaushal

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 01 July 2011

@ Kaushal

from above query again

"When I file a return under HUF how will this inheritance be treated? "

is not the query poster trying to point out his own HUF, and not the father's

if it was of fathers then the line

"and the proceeds were split amongst the 5 folks. My wife's share was credited to our joint account."

Here i feel that property was held by his father in individual capacity, and due to natural inheritence, it got divided in all successors, father's HUF has no role in this, but the person is asking that he want to take the money "wife got from such division" to HIS own HUF and asking for tax provisions.

correct me if i m wrong.

Mukesh Kumar Singh (CA-FINAL) (4094 Points)
Replied 01 July 2011

Originally posted by : future ca
	Originally posted by : aNkuR jAin.................... Yes, your wife need to pay tax on the capital gains... and that tax is required to be paid through your wife's return not your huf.. ok take 1/5th of cost of that property, then compute indexed value of cost and calculate capital gain of your wife........... Remember to take the exemption limit of Rs. 1,90,000/- in your wife's return ok agreed

Shrikant Subramanian (Chartered Accountant) (176 Points)
Replied 01 July 2011

Originally posted by : kaushal (taxbykk)
	Hi krish Yes the income from capital gain shall be treated as the income of the HUF. HUF pays tax @ 20.6% on capital gain The return of income shall be filed by HUF signed by karta (your wife). The cash will be deposited in the name of HUF. Now apply to AO for complete partition of HUF. If I am correct the S is 170. After the assessment by AO of the HUF then you can distribute the income which shall be exempt from tax in the hands of members of HUF. S 10(2). thanks

iam confused with the above statement. I was of the opinion that the wife needs to pay tax on the capital gains that too in her returns and she can claim expemtion till 190000. If the wife does not pay then it would be clubbed as per S 64.

HUF thing by itself i did not agree with and how can wife be the karta of that father's HUF? Off the two answers posted who is right? Ankur Jain or Kaushal? My answer too i have given.

Correct me...if iam wrong.

Prabhavathy, M.Com, ACA (Chartered Accountant) (35 Points)
Replied 01 July 2011

Mr.Kumar Krish,

If your query is regarding taxation of your own HUF, then as per supreme court decisions a female member of the family cannot blend her property with the HUF property. Hence it cannot be taxed in the hands of your HUF.

And to my knowledge once a girl is married she cannot be considered as a member of father's HUF. so even in case if it is a property of HUF, she cannot be considered as member of that HUF. so i dont think its correct in taxing in the hands of father's HUF.

Pls correct me if i am wrong.

(Guest)

Hi all

very happy to note such a positive discussions. I think let krish clear some confusions then i will explain my view point again.

I have noted the reply of prabhavaty. I shall include that reply also in my answer.

Thanks

1 Like

Sandeep Surana (Practicing Chartered Accountant) (156 Points)
Replied 01 July 2011

Property was held by her father in individual capacity and father died. Afterthat death of father due to natural inheritence, her got his share in property as a legal owner in individual capacity.(Legal heirs owner of property after death of original owner) Because legal heirs owner and owner have right to sale of his share in property therefor Capital Gain arises from that assets is Taxable in Individual Hands, not in HUF, and in this case father's HUF no act any role, and even if her share credited in your joint A/c, capital gain amount taxable in hands of her WIFE as individual capacity, So i SUGGEST you, you pay tax on Capital Gain as Individual capacity and file the return of your wife.

I AM AGREE WITH MR. U S SHARMA

Just Only my Opinion

C.A SHASHANK GOYAL (Chartered Accountant) (362 Points)
Replied 01 July 2011

one additional point also in my opinion to taken into consideration is partion of huf is not transfer with in the meaning of section 47 and cost in the hands of wife will be 1/5 of that of father by virtue of section 49(1) and indexation will be done from the year in which property is first held by her till date of transfer in case of long term capital gain .