Upgrad LLM

Selling a property immediately after settlement deed

This query is : Resolved 

Guest (Querist)
12 November 2019

Dear Sir/Madam,

Could you provide some clarification on the tax implications for the following scenario please?

My parents and I are the joint owners of a flat since 1999. Due to advanced age, my parents wish to do a settlement deed and transfer the property entirely in my name. If I sold the property without doing the transfer, I get the LTCG benefits and can save considerably on taxes. Questions:

1) If I sold the property immediately after the transfer will it be treated as STCG and I do not get the LTCG benefits which means I could attract 30% of taxes from the sale of the flat?

2) Even if I retained the flat for two years and sold it later, the LTCG benefits will be very minimal since cost indexation is done only for two years, whereas without the transfer, the ownership is for nearly 20 years and capital gains would be much much less. Is this correct?

3) Or does it NOT have any impact on taxes if the settlement deed is done and I sold it either immediately or in the future since the ownership from 1999 will only be taken into consideration.

4) I have one brother (who is not a co-owner of the flat). Would it be OK if the settlement deed is done under my name only (since my brother has not invested in the flat in any way and the flat was purchased entirely from my earnings, not even with my parents' financial resources though they are co-owners). Or do I have to get a statement from my brother that he and his family have no claims over the property?

Best Regards,
Dr. S. Saravanan.

Dr J C VashistaOnline (Expert)
13 November 2019

It would be better to consult a local prudent chartered accountant for appreciation of facts, guidance and proceeding.

H.M.PatnaikOnline (Expert)
13 November 2019

In my opinion, Considering a situation where the settlement deed is executed in your sole name and then you go for sale of the property to some other person, still you will get benefit of LTCG on transfer of title since you continue to be in joint ownership of the said property since 1999.

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