About tax implications of property sale

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Rajendra Joshi (Querist)
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12 September 2016 Hello,

I have a question regarding filing property sale and purchase details and tax implications.

My father and mother in law are retired persons and were leaving in other town till May 2013.
They had a bunglow in on My Mother in law's name.
Due to old age they wanted to sell it and by that amount purchase a flat near to us and shift to our town. But unless they sell bunglow they could not purchase the flat.
Since my mother in law is retired and old, she could not get a loan also.

We found one re-sale flat near to our home and what we did was that, Me and My wife paid the down payment for the flat and applied for a loan.
We bought the flat on 3 names - (My mother in law's as first owner, Me and my wife's as 2nd and 3rd owner resp.) for this we made our mother in law also as a "party" in loan.
This was in May 2013. The flat price was Rs. 40 Lakhs. And EMI started deducting from my account.

Fortunately within 3 months time i.e. in Aug 2013, My mother in law could sell the bunglow for nearly same price as 40 lakhs.
Then my Mother in law did the complete payment of the loan from the proceeds of the sale of bunglow and repaid the loan in just 3 months and closed the loan.

Now my questions are about Capital gains tax implication of this transaction.
Question 1: I heard the rule that If a person sells a property and invests the full amount in another property within 1 or 2 years then there is no capital gains tax to be paid.
Now, here the situation is that we purchased the flat first on loan and then my mother in law sold the house and repaid the loan in 3 months time only. So does above rule apply here ? that she does not have to pay any capital gain tax ?

Question 2: She was the sole owner of earlier house but in case of purchased flat, it is on our 3 names We had to do that to apply for loan.
But since she has paid the full amount of the loan by selling her own house
Will she get the full 100% benefit of Captial gain tax nullification due to above purchase of the flat ?

Question 3: What and how should we show this transaction to file income tax ?
There is a circular from IT department that we can show undeclared property transaction till Sept 2016. So we would like to declare this transaction.

Waiting for your reply.
Thanking you in advance.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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12 September 2016 1 Buying a property before one year of sale is also allowed and no capital gains tax need be paid.
2 No problem in buying 3 names being daughter and son in law. Full benefit of capital gain exemption available.
3 This is an exempted transaction no need to declare under undeclared transaction.
3

Rajendra Joshi

Rajendra Joshi (Querist)
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13 September 2016 Respected Sir,

Thanks a lot for such a quick response which I did not get elsewhere on web.

Thanks once again.

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