Selling plot and capital gains tax

Tax queries 781 views 4 replies

Sanjay

Others

29 Points Posted on 01 March 2013

Hi Experts,

My mom has a plot that was purchased in 1988. We wish to sell it due to some financial constraints - hence the proceeds from the sale may not be used for purchasing another property etc. The proceeds of the sale must be ultimately transferred to me for further transactions (I already have a house property in my name).

Hence, is it better (from capital gains tax perspective) to sell the plot and then the money be given as gift to me, or should I transfer the plot in my name as a gift from my mother and then sell it?

Any information on how to handle this is greatly appreciated.

Thanks,

Sanjay.

Replies (4)

Mihir

Wealth Manager

5293 Points Posted on 01 March 2013

It is advisable to sell the plot while your mother is the owner, and the sale proceed can be gifted to you.

Prashanth S K

Practice

148 Points Posted on 01 March 2013

Dear Sanjay,

If your mom has any other source of income(excluding this capital gains) exceeding the basic exemption limit applicable to her, both the options you have mentioned are indifferent. But if your mom doesn't have any other source of income(excluding this capital gains) it is better to make her sell it so that to the extent of unexhausted basic exemption limit applicable to her, she will be entitled to a deduction form the capital gains and the balance will be chargeable to tax @ 20%.

Kindly correct me if i am wrong.

Regards,

Prashanth.

Sanjay

Others

29 Points Posted on 02 March 2013

Hi Prashant / Mihir,

Thanks for the advice.

Prashant - My mom has no other source of income, so it seems like it will be better that we sell it while the plot is in her name?

Regards,

Sanjay

Prashanth S K

Practice

148 Points Posted on 02 March 2013

Yeah Sanjay. I hope ur mom is a senior or very senior citizen on account of which the basic exemption limit will be higher. So if she sells it the entire basic exemption limit is unexhausted and her capital gains will be deducted to that extent. Regards Prashanth.