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tds & i tax return filing on sale of inherited property


A residential house was purchased in 1953 and redeveloped in 2012-13 by father who died in 2013. Mother became the owner by way of relinquish deed executed by children in her favour.

Mother before her death in July 2020 entered into an Agreement to sell the property for (say) Rs.100 Lac and also received Rs.35.00 Lac during FY 2019-20 as first and second installment without deduction of any TDS by purchaser

Each of the legal heirs, inherited 20% share in parental residential house after the demise of  mother.(Father not alive). All the legal heirs agreed to honour the “Agreement to Sell” entered by mother and will execute the Sale deed in FY 2020-21.

Long Term Capital gain on the entire property works out to about (say) Rs.40.00 Lacs.

Questions are

1. Do we reflect the receipt of Rs. 35 Lac in mother's IT Return for FY 2019-20. If yes, under which head.

2. How much TDS should be deducted by purchaser while making the balance payment of (Say Rs.13 Lacs) to each Legal heir and deposited with Tax authorities on their behalf.

2. What Sale value and cost of property with improvement and indexation is considered in I Tax Return by each Legal heir. Is it 20% of all values for every body? since there is no provision to show the consideration and cost of property at full value and then calculate one's share of Capital gain.

3. If 20% of Total value of property is taken every where by each of Legal heirs then How the records will match with Records of Sub Registrar Office who will register the sale deed for 100% value.

Thanks.
 

 
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Lawyer

Seek professional service of local chartered accountant.

 
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Retired Manager

In the matter referred by you,  there are two issues which are as follows:

 

  1. Filing of IT Return of your deceased mother who,  during the year received advance for sale of house property and calculation of Capital Gains Tax on such amount. 
  2. Filing of IT Return by the legal heirs and how to show the share of balance proceeds received by each legal heir and treatment thereof for the purpose of calculating Capital Gains Tax.

Calculation of Capital Gains Tax is not a easy task. Several issues have to be addressed and taken into consideration.


In the case of house property inherited if sold, the sale consideration minus the  market value on the date of inheritance  is the basic capital gains from which several permitted deductions are to be deducted and arrive at net capital gains and only on such net capital gains tax is to be paid.

Further, there is a facility of no capital gains tax if seller invests entire sale consideration  within 60 days(subject to correction) of such sale on purchase of alternate house property. You need to deposit the sale consideration immediately on receipt in a dedicated bank fixed deposit account which needs to be opened following extant KYC guidelines issued by RBI. The scheme is called Capital Gains Deposit Scheme, which every bank is offering.

 

Besides the above deposit scheme,  there are other investment schemes also to avoid Capital Gains Tax.

 

Matter is not a simple legal point to be clarified on this forum. 

 

Therefore I advise you to contact a reliable Chartered Accountant (with all relevant details and papers) who specialised in filing of IT Returns and handling of Capital Gains Tax and seek such CA's assistance to handle the tax matter


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Sir, You indicated / wrote that 

In the case of house property inherited if sold, the sale consideration minus the  market value on the date of inheritance  is the basic capital gains from which several permitted deductions are to be deducted and arrive at net capital gains and only on such net capital gains tax is to be paid.

Will I be correct to understand that

if the inherited property is sold immediately (within the same Financial year) say in two months the capital gain will be Zero.?

Thanks.

 
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