My friend bought a house let suppose for Rs 6 lakh. He will sell it after 5 years let suppose for Rs 10 lakh. His profit is 4 lakh. (Ignoring C.I for simplification). He's ready to pay CG tax.
But We want the sell proceeds to receive 5 lakh in his account and 5 lakh in my account. I am ready to pay tax on it.
What will be the tax treatment and how to show it in both of our accounts.
pls guide.
4 Replies
CA Raj Doshi
(Practising CA)
(8924 Points)
Replied 06 January 2022
A is the seller of the property so buyer will pay only to A. Even if the buyer agrees to pay 5L to A and balance 5L to A's friend, it will still be considered as full income earned by A and then utilised and given to A's friend. it is called application of income. Generally, such payment by A to his friend directly or indirectly will be taxed in the hands of A's friend as a Gift from Non-Relative taxable under the head Income from Other Sources. Unfortunately, A will pay tax on 4 lakhs and A's friend will pay tax on 5 lakhs.
Krishanu Majumder
(Accountant)
(174 Points)
Replied 06 January 2022
Can A gift half of the property to A's friend before selling to avoid double taxation?
CA Raj Doshi
(Practising CA)
(8924 Points)
Replied 06 January 2022
The stamp duty value of the property gifted will still be taxed to A's friend
CA Puja Sharma
(Chartered Accountant)
(5010 Points)
Replied 06 January 2022
Gift of the property will also be liable to tax because its gift to a nonrelative.
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