calvin hobbes (PM) 04 October 2017

Property settlement via Gift Deed & Relinquishment Dcombinat

Hi all My mother has a property which was bought by my father during his lifetime. I, my brother and sister relinquished our rights in favour of our mother about 10 years back after our father's Denise Now 1 brother wants to buy share of the 2nd brother and get the property registered in his name. Sister and Mother do not have an objection to this arrangement To do this Mother, Sister and Brother 2 will do a relinquishment deed in father of Brother 1 And Brother 1 will transfer funds to brother 2 as his share and this will be done in the form of a GIFT by a registered Gift Deed Question is A) Although the money is being gifted by brother 1. Can this be construed as sale of property and this attract Capital Gains or added brother 2's income not ? Since the full transfer will be in white, the tax amount will be substantial B) Can brother 1 take loan against this property and transfer the same to brother 2 by way of gift ?

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7 Replies

manoj 05 October 2017

call me to solve your query at cell no 8686159292

P. Venu (Advocate) 05 October 2017

The posting lacks clarity.

Krishna. Advocate (Advocate) 05 October 2017

Your query is not clear

calvin hobbes (PM) 07 October 2017

Thabks for your response. what is not clear ?

There are 2 steps

1. Transfer of Property to Brother 1 via Relinquishment Deed

2. Transfer of money from brother 1 to brother 2 via Gift Deed

query is whether tomorrow the money received bt brother 2 can be considered as sale of property via Relinquishment deed and attract tax ?

Master Warrior (AOR) 08 October 2017

A) The two transactions CAN happen but can also result in an audit and tax penalties/fines since it is not actually a gift but a sale. Same situation when it is registered, it could be looked at as what it is, avoidance of tax.

B) If there's a loan on the property you won't be able to transfer it without the lender's consent (which likely won't be given, unless both names are on the loan then maybe). If it's done this way there COULD be an argument that the only "value" of consideration is the difference between property value and loan amount and only that portion be subject to transfer tax.

You've mentioned capital gains tax, but forgot about the registry tax/stamp duties. If there's separate transactions that's different but two close transactions? Might be worth paying the tax/duties.

calvin hobbes (PM) 08 October 2017

Thank You Master Warrior. This is exactly what I was looking for But, since propertyis registered in mothers name and will be transferred to Brother 1 (though R deed is done by brother 2 and sister as well ) But gift will come from brother 2 to brother 1, doesn't that separate the 2 transactions ?

P. Venu (Advocate) 10 May 2018

The author's response is troubling; his response suggests that he is seeking particular information without disclosing even primary information as to the complete particulars as to legal heirs. Your subsequent explanation only confuses the matters. Why should the brother who relinquishes his property gift money as well? So also, how could there be a registered gift deed of money, with no property involved?