Income tax payment on amount received after selling property.
mukesh kumar
(Querist) 17 August 2015
This query is : Resolved
my father sold ancestral property (agriculture land)and received 60 lakh. He intend to distribute this amount equally among his three sons (20 lakh each)and he want to keep himself away for paying income tax. Is it legally possible to distribute this amount by way of preparing gift deed.However sons are ready to pay income tax, if required, or invest amount on property. In this case who will be responsible to pay income tax on long term capital gain earned. is it possible. One lawyer says that tax paying responsibility will be of father in this case, is it so.
Kindly suggest.
H.M.Patnaik
(Expert) 18 August 2015
Since the title of the property disposed by way of Sale Deed was in the name of your father and he has received the sale proceeds , the liability to pay income tax falls on him under the head Capital Gain .
In the facts and circumstances narrated in your posting above, the liability can not be shifted to any other person .
Rajendra K Goyal
(Expert) 18 August 2015
Agricultural land in Rural Area in India is not considered a capital asset. Therefore any gains from its sale are not taxable under the head Capital Gains. For details on what defines an agricultural land in a rural area search net or consult tax consultant.
If you are into buying and selling land regularly or in the course of your business, in such a case, any gains from its sale are taxable under the head Business & Profession.
Under Section 10(37) of the Income Tax Act, Capital Gains on compensation received on compulsory acquisition of urban agricultural land is exempt from tax.
The capital gains tax liability if applicable can not be shifted in the manner mentioned by you.
Discuss in details with expert tax consultant.
mukesh kumar
(Querist) 18 August 2015
Thanks for answer my query..
In case liability of tax paying is rest with my father.......its ok.
actually we want to invest money in purchase of plot or agriculture land etc to save tax as provision available. Can my father buy three plots of each costing 20 lakh in the name of his three sons.
krishna mohan
(Expert) 03 September 2015
Once due tax is paid whether as professional income or capital gain rest of the money can be invested in a way liked. But to have exact clarity you can consult practicing Income Tax consultant or CA so that you are not only tax compliant but also avail exemption to the full extent.
