16 February 2018
The capital gain on sale of flat is taxable in the hands of the owner of the flat. Generally speaking, the capital gains should be taxable in the hands of both the owners. Hence in order to avail the deduction/exemption on investment of capital gain in a new house, the new house should have been in the name of the owners of the flat that was just sold. That being said, many a time, the flat is purchased jointly, with no financial contribution made by the joint owner. An example is, a married couple, in which the husband is working, obtains a home loan and purchases the flat in a joint name with his wife. Relying on provisions relating to clubbing of income, it can be said that the capital gain in such cases would accrue to the owner who purchased the flat out of resources belonging to him. Proving this is of course easier said than done. The capital gains in your case is 25,00,000 - ( 4,00,000 x 272/105) = Rs. 14,63,800/- approximately. You can reduce expenses incurred on transfer from this amount.
I am drawing your attention to two decisions rendered by the appellate authorities. This article also will give you some comfort - http://www.financialexpress.com/money/have-you-purchased-a-house-in-your-relatives-name-you-wont-lose-income-tax-sop-now/660228/ The case laws are DIT Vs Mrs Jennifer Bhide (252 CTR 444 - Karnataka HC) Shirish Vinayak Godbole Vs ITO (2013-TIOL-413-ITAT-PUNE) Jitendra Faria vs ITO ITA No.6792/Mum/2016 So you can always argue, that your father invested his share in his own name, while your mother invested her share in your name, in the new joint property. Just remember that this may be challenged by tax authorities but the above judgments will help your case if it comes to you needing to appeal or convince a tax officer
From a practical perspective The sale of old flat may not result in a scrutiny because it is 25,00,000/-. No TDS would have been deducted and the same is below the reporting amount for AIR purposes. Furthermore, if your mum does not file returns, you can simply show that the capital gains was your dads and he invested the same in the new flat in toto. If he is a senior citizen the likelihood of a limited scruitny or scrutiny being initiated is minimal assuming that he has not other "trigger" transactions.
DISCLAIMER The views expressed by me are pro bono, based on facts presented in the question and assumptions made by me. They represent my personal understanding based on my experience, education and training as may be relevant. Although due care is taken by me before expressing an opinion, the views or opinions expressed by me do not constitute professional advice. Any course of action or inaction that may be adopted by the reader is on their own responsibility without any recourse to me, the author.
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