Mr. A (Husband) has sold his plot of land and earned long term capital gain of Rs.4,00,000/- (5,00,000-1,00,000). To save on Income Tax u/s-54F, Mr. A is planning to invest gross proceeds of Rs.5,00,000/- for purchase of a residential flat costing Rs.20,00,000/- and balance Rs.15,00,000/- will be financed from home loan from a bank. The possession of this new flat will be given by builder after 18 months and payment are to be made to the builder on construction linked payments basis. After getting possession, this new flat will be given on rent.
Mr. A is presently also having one residential house, which is self occupied. Mrs. A is also having one another residential house, which is let out. Both Mr. A and Mrs. A are in service and are having nominal taxable income.
Now, Mr. A has following options: -
a) To purchase new flat in his own name only with 100% ownership,
b) To purchase new flat in his name jointly with his wife, but entire cost of new flat including home loan EMI to be paid by Mr. A only from his own sources. By doing this, there will be a saving of 1% in stamp duty at the time of registry of flat. Will Mr. A be treated as 100% owner or not in this case for income tax purposes?
c) To purchase new flat in the his name jointly with his wife, and the entire cost of new flat including home loan EMI to be paid by Mr. A and Mrs. A in the ratio of 2/3rd and 1/3rd respectively. In this case, Mr. A will invest Rs.5,00,000/-, Mrs. A will invest Rs.2,50,000/- and balance will be financed from home loan.
Keeping in view the above, what are the pros and cons of each option mentioned above and which option is the best option from tax planning angle and why. Please help me to solve this problem.
Thanks
CAclubindia
