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Ltcg complex situation

Rambhao (Accountant) (23 Points)

16 December 2016

I bought a flat in Sep 2007. Flat price was 12,50,000/- on Loan. Made my brother as co owner. (He was studing at that time) Now (Dec2016) as per the situation, I am selling the flat to him, probably by release deed.. I am suppose to get 22,50,000/- In this scenario: Is this amount liable to LTCG?? If yes, how much? CII are as follows: 2006-07 => 519 2007-08 => 551 and for 2015-16 => 1081 Please help me with this.

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6 Replies

Shubham Gupta (Business Consultants) (2077 Points)
Replied 16 December 2016

22,50,000 is the amount that you will pay to your brother for selling Half share in property?

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CA Prateek Garg (CA in Practice) (1447 Points)
Replied 16 December 2016

22.50 lakh shall be the consideration... reduce your share of cost (after indexation) from this..
That would be your LTCG..

1 Like

gopal (student) (212 Points)
Replied 16 December 2016

Another Way....
just give gift to your brother the share you owned and also take gift of money you want..
gift from relatives exempted from IT

2 Like

Rambhao (Accountant) (23 Points)
Replied 18 December 2016

I am selling my share....so I will get 22,50,000/-

In short my invesment was 12,50,000/- in 2007 CII 2007-08 => 551

I will be getting 22,50,000/- in 2016 CII 2015-16 => 1081

Mihir (Wealth Manager) (5293 Points)
Replied 18 December 2016

Prepare a release deed. LTCG will be applicable to you. However you may reinvest u/s 54 to get exemption from LTCG.

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Sanjay S (Chartered Accountant) (1375 Points)
Replied 18 December 2016

I agree with Gopal view..

1. Initiating a Gift deed to transfer the flat to brother for no consideration.

2. Then brother can gift an amount of Rs. 22.5 Lakhs to you after some time.

This means item (1) above is exempt in hands of brother u/s 56(2)(vii) being gift received from a RELATIVE. The gift transfer is not taxable in your hands since there can be no Capital Gain on transfer of immovable properties by way of gift u/s 47.

Again, item (2) above is exempt in your hands since section 56(2)(vii) exempts the same. Your brother doesn't get any deduction whatsoever for this amount.

Hence this whole arrangement would have the effect of shifting the tax liability onto your brother since he cannot claim deduction for Rs. 22.5Lakhs. Also, when your brother transfers the property at some point in future, he can claim the index of your cost of Rs.12.5 Lakhs as Cost of acqn. His period of holding will be deemed to also include the period for which you had held the property. This is pursuant to the decision of HC in Manjula J. Shah's Case.

Hope this helps.

Contrary views are encouraged.

2 Like