Avoiding ltcg tax on sale of immovable property
abhinav
(Querist) 10 December 2013
This query is : Resolved
Hello Experts,
Last June, Me and my brother had purchaced an underconstruction flat each for which we have already done a payment of 95% of the total cost.( We have bought individual flats and are managing our assets and finances individually)
80% of the total payement has been financed by a home loan.
Now comes the query:
My mother holds a plot which was acquired by her around 20 years ago. She intends to sell the plot and give the amount to both of us to prepay our Homeloan. To avoid the LTCG tax on sale of this property, we thought of getting the gift deed registration done, where our mother gift the plot to both of us.
Our reasoning is this that once we get the plot as gift, we sell our share and divert the proceedings in our respective home loan accounts.
My queries:
1) Is this Gift deed idea legal in court of law?? Can the mother gift her acuired land as gift (equally) to both of her sons??
2) Will this gift attract any tax on the receivers' hand??
3)Will the proceedings of the gift after sale attract any LTCG tax, considering the proceedings are diverted towards prepaying a Home loan??
4) Does Section 54 specifically say that the proceedings has to be necessarily diverted to buying a property and not to prepay any Home loan??
Note: * This would be the first property bought for both the brothers.
* We have no other siblings.
Thanks in Anticipation
Abhinav
ABDUL RAZIQUE
(Expert) 11 December 2013
Yes your mother can gift you self acquired property.
you read care fully sec 54 and hope find your answer.
prabhakar singh
(Expert) 11 December 2013
1.yes! she can legally do.
2.NO!
3.If donees sale it(gifted plot) with in 03 years SHORT TERM CAPITAL GAIN WOULD BE ATTRACTED AND after holding the same for three years 'long term capital gain tax would be attracted.
SECTION 54 OF WHICH ACT?THERE ARE MANY ACTS WITH SECTION 54?
T. Kalaiselvan, Advocate
(Expert) 11 December 2013
Your queries have been properly addressed by Mr. Singh. Nothing more to add.
abhinav
(Querist) 11 December 2013
Hello Experts,
ThanX Mr.Singh for clarification. However, please help me understand one finer part of the uery which somehow remained unaddressed-
- the proceedings of the sales(assuming it was more than 3 years and hence we speak of LTCG tax) is diverted to prepaying homeloan, am i entitled to waiver of the LTCG tax??
From what i understand, from IT perspective, if i divert the sale proceedings of a immovable property(older than 3 years) to buying a new property, i am not etitled to LTCG tax. hoever ,does this relief exists if i use it for prepaying homeloan???
ThanX in advance
Surrender K Singal
(Expert) 13 December 2013
Section 54 is of The Income Tax Act, 1961;
Investing proceeds of sold property in another property within 2 years can save CG
