Capital gain - ancestral property

Tax queries 419 views 3 replies

Seema

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38 Points Joined February 2011

We recently sold our ancestral property (constructed in 1964). My Dad had constructed it. After his expiry, my Mom and us 4 brothers and sisters became the legal heirs to my Dad's share. We did not transfer of the property in our names. We then jointly sold this property. My kins & Mom have orally relinquished their rights in my favor and i have recd the amount in my account.

Now the question is, how will be the taxation.

1.Will all five of us need to show the capital gains and file the returns. No one except me are taxpayers.

2.If they show it in their returns should I transfer the shares to their accounts.

3.Can they gift me that amount after filing capital gains and paying the taxes.

4. Will they get the benefit of Basic Exemption Limits.

5. I want to pay off one of my home loans (purchased two year before sale of the ancestral property.

6. We dont know the cost of the property.

Sheema

Replies (3)

anonymous

student

750 Points Joined May 2016

1. the whole amount will be taxable in your hands since you received it. and moreover, there is no legal documentation about your siblings relinquishing their rights.

2, 3 and 4 are N.A. in your case.

5. yes you can pay the loan and claim benefit under section 54.

6. if you dont know the exact amount, please estimate the same or else approach an estate agent in your area who might help you out. the last option is to approach the valuation expert

Mohan

Audit Assisstant & Accounts Manager

489 Points Joined December 2009

In my opinion since there is no documentary evidence of relinquishment of rights by your siblings, income should be in their respective hands irrespective of who receives consideration since paying to single person or multiple is only a convenience of both parties. Accounting treatment would be that of capital gain in all legal heirs account. Accordingly returns should be filed. However , you can execute MOU among you this regard

Kashyap

student

51 Points Joined June 2009

In response to your query, please note the following:

1. All the legal heirs are required to disclose their portion of Capital Gains in their return of Income as you have mentioned that you have jointly sold the property. This is also because there is no documentary evidence of relinquishment of right of their portion of the Capital Asset. For the purpose of Income tax, relinquishment of right attracts levy of Capital Gains. Therefore they will either have to pay Capital Gain tax on transfer of the mentioned property OR on relinquishment of right. If the Income has accrued or arisen in India, they are required to compute and pay tax on the same.

2. In the absence of Power of Attorney, their respective shares are required to be transeferred to their respective bank accounts. In the absence of information I am unable to give response by considering the provisions of representative asessee.

3. This is a matter of tax planning. So, please consult your Chartered Accountant on this matter.

4. They will get the benefit of Basic Exemption limit if their residential status is "Resident" as per Income tax Act.

5. Consideration is to be used for acquiring another house. I am not aware of any case law or circular or notification where the consideration can be used to pay housing loan. Therefore in my personal view, loan repayment benefit cannot be claimed.

6. In addition to the response by 'anonymous', if you have municipal tax receipts of that time, you can estimate its value.

Please consult your Chartered Accountant on this matter before taking decision on my advise.