In the case of Reverse Mortgage, when the borrower of the loan dies then the bank disposes off his property and realises its loan alongwith the accumulated interest thereon and in case of any surplus left, the bank gives it to the borrower's legal heirs who are liable to pay capital gain tax on it. But if in case the borrower has no legal heirs and the bank realises such a gain on sale of his property then who will be liable to pay the tax on such a capital gain?
3 Replies
M. Gokulakrishnan
(Assistant Manager - Taxation)
(49 Points)
Replied 17 June 2009
It is not necessarily the legal heirs. It is the nominee mentioned by such senior citizens in the reverse mortage application form itself. The bank will pay the amount to the person whose name is mentioned in the form. It is not necessarily the legal heirs.
The bank will any way ask the assessee to nominate a person in this behalf and it is mandatory. Also the assessee during his life time has every right to change the nominee name.
Even this is very delayed, hope this clears you..
Prem Kumar
(Articled student--Final)
(375 Points)
Replied 20 June 2009
Reverse mortage does not attract capital gain tax. It is regarded as not a trnsfer u/s 47 of the income tax act. And any amount received by senior citizen notified under reverse mortage then it will be not treated as income and will not be taxable......
M. Gokulakrishnan
(Assistant Manager - Taxation)
(49 Points)
Replied 26 June 2009
What prem kumar said is partly correct. The transaction is not regarded as transfer and does not attract capital gain.
But when the property is sold after the death of the senior citizen, the sale of property by the bank attracts capital gain. In such a case the tax has to be paid by the bank.
But neither the senior citizen nor the purchaser (legal heir or any one as stated in my previous comment) suffers any capital gain tax.
Hope this adds value....
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