Purchase of flat/land in mothers name

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 February 2014 Dear Sir,

my mother is a house wife. her income comprises of only interest from Fixed Deposit.

If i want to purchase a flat in which my mother will be second owner and will make about less than 50% of the payment through her account, will Income tax ask for details of source of income. The payment routed through my mother will be provided by my father and my father have paid full tax on the same amount. there is no black money involved.

my mohter holds a pancard but have not filed a single return till date.

what will be the scenario in this case and what are other things to be considered. please guide in this regard.

thanks

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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27 February 2014 Buy the ssdproperty in 3 names. Yourseld, Your father and your mother by showing equal share

Querist : Anonymous

Querist : Anonymous (Querist)

27 February 2014 thank you very much sir.

Also on the contrary if i want to purchase a land in my mothers name (single owner) amounting to approx 15 lacs.

what will be the scenario in that case. i dont want to add any joint holders in land.

thanks

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 If you plan to purchase land solely in your mother's name and she will be the single owner, there are several important considerations and steps you should take to ensure compliance with tax laws and address any potential issues:

### 1. **Source of Funds**

**Verification of Source:**
- **Income Justification:** Your mother will need to justify the source of the funds used to purchase the land. This includes showing how she acquired the money used for the purchase.
- **Documentation:** Ensure you have documentation such as bank statements, fixed deposit receipts, or any other proof of where the funds came from. If the funds are a gift from you or another relative, a properly executed gift deed may be required.

**If Funds are Gifted:**
- **Gift Deed:** Draft a gift deed if the funds are being gifted to your mother. The deed should clearly mention the amount gifted and the relationship between you and your mother.
- **Documentation:** Keep a copy of the gift deed and related bank transfer records.

### 2. **Tax Implications**

**Income Tax Considerations:**
- **Filing Requirements:** If the amount being invested is significant and if your mother’s total income is above the taxable limit, she should file income tax returns. This helps establish a clear record of her financial status.
- **No Tax on Gift:** Gifts from a close relative (including mother) are generally not taxable. However, it's important to have proper documentation to support this.

**Property Income:**
- **Rental Income:** If the land is later used to generate rental income, your mother will need to report this income on her tax return.
- **Capital Gains:** If the property is sold in the future, capital gains tax will apply based on the difference between the sale price and the purchase price.

### 3. **Legal and Compliance Aspects**

**Purchase Documentation:**
- **Sale Deed:** The sale deed should reflect your mother as the sole owner of the property. Ensure all legal formalities are adhered to.
- **Stamp Duty and Registration:** Pay the appropriate stamp duty and complete the registration process in your mother’s name. This ensures the property is legally registered in her name.

**Verification and Proof:**
- **Bank Records:** Keep detailed records of how the funds were transferred to cover the purchase. This will help in case of any future queries or investigations.

### 4. **Considerations for Single Ownership**

**Financial Profile:**
- **Financial Assessment:** If your mother’s financial profile is not typical for someone making such a large purchase, be prepared to provide an explanation to tax authorities if needed.

**Impact on Tax Returns:**
- **Filing Returns:** If the purchase of land represents a significant part of your mother’s financial profile, and especially if it is funded by a gift or loan, it's important to include this in her tax returns.

### 5. **Future Planning**

**Legal Advice:**
- **Consultation:** Given the significant amount and the implications, consider consulting with a tax advisor or legal expert. They can provide guidance specific to your situation and ensure all documentation is in order.

**Record Keeping:**
- **Maintain Records:** Keep comprehensive records of all transactions related to the land purchase. This includes the source of funds, purchase documentation, and any correspondence related to the transaction.

### **Summary**

- **Document Source of Funds:** Ensure all funds used for the purchase are well-documented and justified.
- **File Returns:** Ensure your mother files income tax returns if required and keeps a record of the transaction.
- **Legal Compliance:** Follow all legal procedures for purchasing and registering the property in your mother’s name.

By following these steps, you can ensure a smooth transaction and be prepared for any potential scrutiny from tax authorities.