Long term Capital Gain

SUJIT (Querist) 06 April 2011 This query is : Resolved
Hello,

My Father-In-Law has sold his Ansestor's property. The property was on his name at the time of deed. He has three daughters. After sale, he has divided the money earned into five and distributed equally among self, spouse and three daughters. My wife (his daughter) has deposited the money in her saving bank account. Now the time has come to pay the tax.
As the deed was done by him, he will be paying the tax against capital gain for the total amount. Please advice, whether my wife has to pay income tax for the money deposited in her account received as her share. How to avoid this double taxation? Please advice.

Regards,

Sujit

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R.Ramachandran (Expert) 06 April 2011
No. Your wife need not pay any income tax on the money received and deposited in her account since it will be treated as GIFT from a close relative and is exempted from income tax. However, your father in law has to pay the capital gains tax at the rate of 20% on the amount of capital gain. Capital gain is arrived at by deducting the indexed cost of acquisition plus indexed cost of improvement done if any from the actual sale proceeds. If the actual sale proceeds is in excess of the cost of acquisition and cost of improvement, then on that excess amount capital gains tax is payable at 20%.
This tax can be saved if the amount of capital gains is deposited in 3 year bond issued by NHAI and Rural Electrification Authority.

Vishnu Promod Srivastava (Expert) 07 April 2011
I endorse the views expressed by Mr. R. Ramchandran
Vishnu Promod Srivastava Advocate

malipeddi jaggarao (Expert) 08 April 2011
But Bank will deduct Income Tax TDS on the interest earned on the deposits unless your wife gives declaration to the Bank. She can give the declaration if her income from all sources including the interest on the Bank deposit is below the taxable income for that financial year. In such cases also, if the declaration is not given to the Bank in time, they will effect TDS and this has to be claimed as refund by filing Income Tax Return.