Stamp duty and it relief on gifted property
Minal Ghag
(Querist) 13 February 2015
This query is : Resolved
Dear Sir,
1. My mother had bought a residential plot for constructing a house. however she now is constructing six flats on the same plot.
2. She wants to give one of the flat to me as inheritance during her life time and wants the balance property to be given to my two brothers later.
3. However as she did not have sufficient funds, for construction, I and my husband have given her 30 lakhs which is sufficient for construction of one flat only. the Market cost of the flat is 65 lakhs.
4. In order to raise this money my husband has taken loan from PF being a central govt employee.
(A) Is giving inheritance during her life time allowed?
(B)Can we register this property as inheritance with my husband as co-owner.
(C) Can my husband get the tax benefit.
(D) How much stamp duty registration charges will be required to be paid for processing it as
(i) Inheritance
(ii) Gift
(iii) Sale deed
(E) What would advisable, to process it as inheritance or gift or a sale deed in name of my husband to maximise tax benefit as well as to pay minimum allowable stamp duty?
Regards
Anirudh
(Expert) 13 February 2015
1. The question of 'inheritence' by anyone during the life time of the owner of the property, simply does not arise. 'Inheritence' takes place only after the demise of the owner of the property, that too when the owner had not left any WILL, GIFT etc.
2. In the given fact situation, it is advisable to go in for Registered Gift Deed by paying appropriate stamp duty. The Gift can be given by your mother in the joint name of you and your husband. Therefore, your husband will also become the co-owner of the property. As Gift is permissible from relative, it will also not attract any income tax issue either in your mother's hand or in your hands. (However, If it is not shown as gift, but shown as 'sale' then your mother will have problem as far as capital gains tax is concerned. In such a case, the guideline value - which you say as Rs. 65 lakhs or so, would be treated as 'full consideration' and the same will be taken into account for the purpose of working out capital gains tax in your mother's hands. Since you have only paid Rs. 30 lakhs and not full consideration, then the difference i.e. Rs. 35 lakhs will be treated in your hands as 'income from other source' and it will be subjected to levy of income tax in your hands. Such problem will get avoided if it is a GIFT.) What is the applicable stamp duty differs from State to State. Therefore, you have to check up locally.
3. Since it is a Gift from your mother, the question of any income tax benefit either to you or to your husband simply does not arise. It is only when any property is purchased by getting home loan etc., from recognised financial institutions / bank, then the interest that is paid on such loan would qualify for some exemption under income tax. In the present case, you did not borrow any money for getting the flat. More over, the same is being gifted by your mother.
Minal Ghag
(Querist) 13 February 2015
Hi Anirudh
Thanks a lot for your Advice. Its been a great help to put things in perspective
Regards
Rajendra K Goyal
(Expert) 13 February 2015
Stamp duty differ from state to state. Consult local lawyer.
Agree with the advise of expert Anirudh.
T. Kalaiselvan, Advocate
(Expert) 18 February 2015
Agreed with the opinions of the experts, stamp duty differs from one state to another you may enquire the same locally and proceed.
Minal Ghag
(Querist) 19 February 2015
Hi every body
Thanks for the advice.
Can you pl further clarify that
We are planning to execute a Gift deed for transfer of the flat from my mother to me and my husband (joint owners)
in this gift deed can we mention that a part of cost for construction was contributed/ given by me/ my husband.
If yes then we will be able to claim IT benefit on Housing loan taken for construction of this property.
Regards
Anirudh
(Expert) 19 February 2015
Who got the Housing Loan? Against which property? From which Bank / Department you got the housing loan?
Minal Ghag
(Querist) 19 February 2015
Hello anirudh
My Husband has taken housing loan from Govt PPF and given it to my mother.
At that time some one advised us to put reason for housing loan it as sale by my mother.
However Now ,if department is approached it can be changed to construction of house on my mother's land.
The reason is true & valid, The money was actually spent by my mother for the construction of the flat.
The problem is that the cost of the construction is 30 lakhs but the govt valuation of property as per the area in which constructed is 65 Lakhs.
hence we will end up paying heavy stamp duty if an outright purchase is shown. (4% of 65 lakhs) where as if gift deed is made then it is only 2%.
But all this will be nullified if we do not get a tax exemption over next ten years of repayment.
Hence my mother suggested that we should make a gift deed with a line endorsed that the part of cost of the construction (30 lakhs )has been borne by us. so that we can avail the tax exemption also.
Is the above option possible ?
Regards
Anirudh
(Expert) 19 February 2015
The problem is you do not have any idea about the Income Tax Exemption. Probably you heard some where about the exemption without properly understanding it, and therefore there is whole lot of confusion.
1. It has been very clearly informed to you that only when one has availed any home loan either from the Department or any of the Financial institutions and pays interest on the said loan, then in that event, the amount of interest being paid to the maximum of Rs. 1.5 lakhs in case of self-occupied house will be allowed to be deducted from the income of the person concerned.
2. In your case, you have not availed any home loan. Taking Advance from GPF is not considered as home loan - though you might have mentioned as the purpose for taking advance. The money lying in GPF is your own money. Having taken the money from GPF Account, you may not get interest which you otherwise might have got had the amount not been withdrawn. But that cannot be equated with paying interest on home loan. Therefore, the question of getting any I.T. exemption in the given fact situation does not arise.
3. No benefit can be derived by showing in the GIFT DEED that your mother got Rs. 30 lakhs from her son-in-law.
Rest of the decision is upto you and your wisdom. We can only guide you - cannot compel you to follow a particular method. Let GOD help you.
Minal Ghag
(Querist) 20 February 2015
Anirudh
Ha! Ha! Agree with your comment about my financial and legal understanding or lack of it.
But I am trying to work upon it by asking my doubts to experts, also doing some reading.
Nevertheless don't get frustrated by the ignorance of us mortals and please keep up the good work of advising us.
Regards
