Money transfer to spouse-tax treatment

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 August 2013 Sirs,
During fy 2011-12 I transferred 8 lacs to my wife's account(by selling an urban orchard land) and bought an agricultural land in her name only. I really intended this transfer as gift to wife. My first question is whenever the land is sold capital gain will accrue to her or me?
Subsequently, during fy 2012-13 I transferred Rs 19 lac to my wife's a/c and purchased a res. flat in our joint name. This money was received by me by selling a vacant urban land. I am going(intend) to claim exemption u/s 54f for waiver of capital gains tax. My second question is in order to get 100% exemption should I show the said transfer as gift to spouse or interest free loan to spouse?
My third question is in general from taxation point of view which is beneficial-loan to spouse or gift to wife ?
Both me and my wife are preparing to file our tax returns for AY 2012-13 and 2013-14 shortly.Please reply very soon.

THANKS!

CA UMESH DULAL

CA UMESH DULAL (Expert)
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21 August 2013 Since you have purchase ag land (i suppose it rural ag land), capital gain is exempted, capital gain in you ITR

Flat purchase in joint name with spouse is eligible for exemption for u/s 54f

you can treat the amount either way gift as well as loan as per your wish

Querist : Anonymous

Querist : Anonymous (Querist)

21 August 2013 Dear Umesh Sir,
Are u confirmed that by investing the sales proceeds of urban vacant land in rural agricultural land one can claim exemption in capital gains tax.Can u quote the relevant section of the I.T. Act?It will be very helpful.
Thanks

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CA UMESH DULAL

CA UMESH DULAL (Expert)
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21 August 2013 yes if following conditions are fulfilled

1. if the ag land is used for ag purpose for last 2 years by you or your parents

2. capital gain is invested in ag land

refer section 54B

Querist : Anonymous

Querist : Anonymous (Querist)

21 August 2013 Dear Umesh Sir,
In point (1) are u referring to the sold land? If yes, then my question is should the sold agr. land be used for agr. purpose personally by me or my parents9as a cultivator), or is it sufficient if the said land has been given on share basis(bataidari) to other person
My second question is that the land which I sold is urban orchard(agr.) land and not a rural orchard(agr.) land. So is the exemption available in case of urban agr. land also?
pl. reply soon.
THANKS!

CA UMESH DULAL

CA UMESH DULAL (Expert)
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22 August 2013 yes i am refering to sold ag land (urban)

If you have sold urban ag land and the sale proceed is applied for purchase of any ag land, the exemption is available.

It is not necessary to do manual labor by the owner, if you have given the ag land on rent or any other scheme, you will be eligible for exemption.

If you have sold rural ag land, the entire amount is exempted income as rural ag land is not capital assets so there is no capital gain accrue to you.

If you have sold urban ag land and purchase rural ag land, you have applied superb tax planning.

My suggestion, hold the purchase ag land for at least 3 years, and sold the land your entire sale proceed for rural land is exempted.