Capital gain on house property

Page no : 2

Mahesh SivaramaKrishnan (Forensic Accountant) (25 Points)
Replied 31 January 2014

While giving reply, I was not aware of it...

So,if A's Father is not alive then it will be taxable in the hands of B only,but the cost of acquisiiton will be NIL,means the entire consideration will be her capital gain...

If the property is a single flat,then this transaction may look like an arrangement for evading the tax liablity out of rental receipts by transferring the property to Mr.C and but this can be proved only by paying the capital gain tax to substantiate that its a genuine transaction,but payment will be received over the period as agreed.

And the impact of transaction in the hands of Mr.C is also an issue,because his AO will ask for source for buying this property and he should also be able to prove the genuiness of this transaction...

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Arpit Pachisia (CA) (734 Points)
Replied 31 January 2014

Hi, Sorry Mahesh but the cost of acquisition will not be NIL rather this cost will be the cost what A's father has paid at the time of acquisition. now let us assume that he has purchased such property in 1 lakh, than indexed value of 1 lakh will be considered along with any improvement, if any. Well I also think that its better to gift such portion of property in favour of Mr.C and when he has such amount of consideration than he will gift out such consideration in favour of B. As no capital gain is arised while gifting a property to relatives. Thank you

Mahesh SivaramaKrishnan (Forensic Accountant) (25 Points)
Replied 01 February 2014

In case of gift or will the Cost of acquisition will be cost to the previous owner but here it doesn't seems to be gift or will na,then COA will be NIL only... Tell me if Ian wrong

Arpit Pachisia (CA) (734 Points)
Replied 01 February 2014

Where the capital asset became the property of the assessee:

a) on any distribution of assets on the total or partial partition of a Hindu undivided family;

b) under a gift or will;

c) by succession, inheritance or devolution;

d) on any distribution of assets on the dissolution of a firm, body of individuals, or other association of persons, where such dissolution had taken place at any time before 01.04.1987;

e) on any distribution of assets on the liquidation of a company;

f) under a transfer to a revocable or an irrevocable trust;

g) by transfer from its holding company or subsidiary company;

h) by transfer in a scheme of amalgamation;

i) by an individual member of a Hindu Undivided Family giving his separate property to the assessee HUF anytime after 31.12.1969,

The cost of acquisition of the asset shall be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the asset incurred or borne by the previous owner or the assessee, as the case may be, till the date of acquisition of the asset by the assessee.

Thank you. Hope it helps.

Kavita (CA Job) (51 Points)
Replied 04 February 2014

Originally posted by : ARPIT PACHISIA

Hi,

Sorry Mahesh but the cost of acquisition will not be NIL rather this cost will be the cost what A's father has paid at the time of acquisition. now let us assume that he has purchased such property in 1 lakh, than indexed value of 1 lakh will be considered along with any improvement, if any.

Well I also think that its better to gift such portion of property in favour of Mr.C and when he has such amount of consideration than he will gift out such consideration in favour of B. As no capital gain is arised while gifting a property to relatives.

Thank you

Hi Arpit,

You are suggesting B should gift the property to C and later cash consideration should be gifted by C to B. Please confirm me if i am right. is there any wayout to protect the interest B ? B is not blood relative of C , She is A's wife who is brother of C , still gift option is Ok?

Thanks in advance

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Kavita (CA Job) (51 Points)
Replied 04 February 2014

B will be considered relative to C for the purpose of Tax free gift?

Arpit Pachisia (CA) (734 Points)
Replied 07 February 2014

hi, kavita

An important person who is covered under the entire provisions of gifts is the spouse of the individual. So if it is a husband then it would include his wife and for a female it would include the husband. Taking this term further the brother and sister of the spouse of the individual would also be covered under the definition of a relative. Add to this the fact that the spouse of such people has also been brought into the coverage.

Any lineal ascendant or descendant of the spouse of the individual along with their spouses would also be covered plus their spouses so this would mean that parents of the spouse and even grandparents can give a gift to the individual and this would not be taxed.

So in this case, Mr C is also relative of Mrs. B. and he will be treated as relative for the tax free gift.

Thank you

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