Rohit3110 (GM) 05 July 2011

Tax treatment of sale of old asset.

Wife sold car which was in husbands name and purchased a new car in her own name.

Old car was sold for Rs 1 lac. New car costed 5 lacs. All EMIs of the old car were paid from Husbands salary account which is joint account.

What should be the tax treatment of this transaction.

Should she report an additional income of Rs 1 lac in her total income when filing income tax as she has benefited from the sale of old car and partly funded the new car which is in her own name ?

Kindly clarify the point.

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2 Replies

Tajobsindia (Senior Partner ) 05 July 2011

@ Author

1. One thing is not clear from the brief; car used for personal or business purposes ?

2. We are assuming it was for 'personal use', hence

a. Car used for personal purpose will be personal effect and not treated as capital asset as per definition in S. 2 (14) ITA therefore the question of capital gain / loss doesnot arise at all.

b. Profit / loss on sale of transfer will not be subject to any tax in present case in hand is our view. Even depreciation is also not admissible.

c. However, for IT purposes the treatement will be completely different if car was used for business purpose (which is not clear from the query).

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Rohit3110 (GM) 05 July 2011

Dear Tajobsindia

Most of us buy a personal car and then use it to drive to office. It was in my personal name but wife was using it to drive to office. She is a salaried employee.

So I guess I can cant do anything here.

Regards