ITAX

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 August 2010 There are two properties. One is owned by Mr.A and the other by Mr.B. A and B are uncle and nephew (real brother's son). They want to exchange these properties with each other.

Kindly advise about the tax planning. Whether gift to each other is a better option? I am of the view that no tax would be leviable bcoz A and B are relatives. Further I am of the view that there will be no capital gain tax bcoz the transaction will be in the nature of gift. Whether A and B will be covered by definition of relative u/s 56 of the I.T. Act.

Kindly advise.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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02 August 2010 For the purpose of Section 56(2) A would be B's relative and hence receipt of property by the nephew would not be liable for taxation.

However for the purpose Section 56(2) B would be a relative of A and hence receipt of property by the nephew to the uncle would be taxable.

In case both the properties are of near equal value and held for more than 3 years then u could go about selling both the properties to each other and by purchasing each others properties claim exemption u/s 54.