Tax liability by gifting a property to a person who is not relative
jagadeeswaran.l
(Querist) 01 January 2011
This query is : Resolved
dear experts,
I have borrowed loan from one X for purchasing of house from the housing board. the lender had given the money in the form of DD drawn in favour of the Housing board and i got the property registered in my name. since I am unable to pay the loan, I am willing to gift the property to him. in this circumstance, am I liable to pay any income tax, since I am not selling the property with any margin.
experts are requested to advice please and thanks in advance.
L.JAGADEESWARAN
R.Ramachandran
(Expert) 01 January 2011
First, if you are not going to repay the loan, then the amount would be treated in your hands as your 'income' in the year in which you originally received and taxed accordingly.
As regards the gift of the property, while you will have no tax liability, the donee will have tax liability.
jagadeeswaran.l
(Querist) 01 January 2011
Dear Ramachandran, thanks for your reply.
If I want to sell the house to X,for the loan amount I have received and without receiving any further money, and execute the sale deed mentioning that for the said borrowed amount as the sale consideration,I am selling the house, then also am I liable to pay any tax. Since towards repayment of loan only, i am selling the house to X.
Kindly advice please and advance in thanks.
REgards
L.JAGADEESWARAN
R.Ramachandran
(Expert) 01 January 2011
You will be liable to pay Long Term Capital Gains tax on the long term capital gain. (i.e. the sale consideration MINUS Indexed cost of acquisition(construction) of the House + improvements if any done = Long term capital gain.
Long Term Capital Gain tax is 20% of the capital gain. However, you can avoid paying such a tax provided you invest the amount of long term gain in acquisition of any other residential property.
