Sale of inherited property via gift deed
RAJESH CHOPRA
(Querist) 20 August 2018
This query is : Resolved
Sir
After the demise of my mother in law in 2012 my father in law took consent of his 3 daughters via relinquishment deed ( as father in law was the joint owner with my mother in law in the property bought in 1986) and constructed 4 floors in Nov 2013 with help of builder and gifted one floor each to his 3 daughter's keeping one floor with him.
My wife was also the beneficiary of one floor via gift deed dated 1st Oct 2014 . In May 2018 my wife sold her floor at a consideration due to financial requirements . Kindly advise if the proceeds are taxable as per law since the property was inherited.
If yes at what rate it will be taxed & is there way to save tax .
also while calculating tax will she get indexation benefit.
Thanks
Vijay Raj Mahajan
(Expert) 20 August 2018
The property came to the wife by way of Gift not exclusively by way of inheritance during lifetime of the father.
Appropriate tax liability on sale proceed of the property has to be paid by the wife.
R.Ramachandran
(Expert) 20 August 2018
Yes, there will be incidence of Long Term Capital Gains Tax in the hands of your wife.
Since it is a property received through GIFT, your wife would not have paid any Consideration for the Floor. However she might have paid only Stamp Duty and Registration Fee.
The Index for the Financial Year 2014-15 (when the property was received) is 240.
At the time of sale of the property in the Fin.Year 2018-19 the Index is 280.
Therefore to first arrive at the indexed cost of Acquisition in the year 2018-19, you have to multiply (the amount of stamp duty paid + Registration Charges paid) by 280 and divide by 240.
From the Sale consideration DEDUCT the cost of acquisition as arrived above.
You will get the Long Term Capital Gain.
Long Capital Gain Tax is payable at 20% of the Gain.
There are methods/options by which the payment of Capital Gains Tax can be avoided.
1. Either by purchasing a new residential property (provided your wife does not have more than 2 houses including the floor which she sold) within 2 years from the date of sale of the floor or Constructing a new residential property within 3 years from the date of sale of the floor. The cost of the new property should not be less than the amount of Capital Gain. If the new property is less than the Capital Gain, then to the extent tax at 20% is to be paid.
2. By taking NHAI Bond or Bond Issued by Rural Electrification Authority, for the amount of CAPITAL Gain, but restricted to a maximum of Rs. 50 lakhs, WITHIN 6 months from the date of sale of the floor. If the Capital Gain is more than the value of the Bond taken, then capital gains tax is to be paid on the amount which is not covered by the Bond.
Dr J C Vashista
(Expert) 21 August 2018
What is the dispute for consideration, analyses and guidance by legal experts?
R.Ramachandran
(Expert) 21 August 2018
Dear Dr. Vashista,
For your benefit:
1. The querist's wife got a gifted property, which she sold it recently.
2. The querist has sought the following clarifications:
(a) Whether the sale proceeds are taxable as per law?
(b) If yes at what rate it will be taxed? amd
(c) Is there way to save tax?
It is in this context the reply has been given.
Obviously, as you understood, there was no dispute for consideration as such, but only clarification on the questions raised by the querist.
Hope this clears your doubts.
