Right of adopted child in property

Q. Q.My grandfather had four sons. One of his sons (my uncle) died immediately after his marriage in 1930. His widow who was issueless adopted me as her heir for all her immovable and movable properties through a Will dully registered in the office of Tehsildar much before her death in 1971. Can I claim her share in the property of my grandfather?

S. C. Vasudeva

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Q.My grandfather had four sons. One of his sons (my uncle) died immediately after his marriage in 1930. His widow who was issueless adopted me as her heir for all her immovable and movable properties through a Will dully registered in the office of Tehsildar much before her death in 1971. Can I claim her share in the property of my grandfather? My other uncles are reluctant to give her property to me on the plea that the widow with no child has no right in the ancestral property.

— S.P. Sharma

A.According to the provisions of the Hindu Succession Act 1956, widow of pre-deceased son has been specified as Class-I legal heir. Therefore, your aunt was entitled to one-fourth share in the property of your grandfather i.e. same share your uncle would have been entitled in the property after the death of your grandfather. It is presumed that you were legally adopted by your aunt in accordance with the provisions of Hindu Adoptions and Maintenance Act, 1956. In such a case you would be entitled to her share in the property which she has willed in your favour.

Can I transfer money to my son?

Q.My son who is permanent employee in a government undertaking has been allotted a plot by GMADA in Mohali. My wife and I have some savings and I want to know whether we can transfer that money to the bank account of my son to enable him to make payment to GMADA towards 30 per cent of the cost of plot and half-yearly installments to be paid thereafter? My son will also partly contribute to the cost/installment amount. — Krishan Lal

A.Your queries are replied hereunder:

You and your wife can transfer any amount to the bank account of your son. The transfer should by an account payee cheque or through RTGS.
There is no income tax implication in this regard as amount of such a gift would not attract provisions of Section 56 of the Income Tax Act 1961 (The Act)
You and your wife should make out gift letters for the amount transferred to the account of son and obtain an acceptance letter from the son for accepting such a gift.

Get the fair value ascertained

Q.Ours is a partnership concern which is carrying on its business of manufacturing paints. The old factory building has been sold as a new building has been constructed on a plot allotted by the government in an industrial area. The new factory has also become operational here. The sale deed has been executed reflecting the sale of building. We have been advised that the short-term capital gain would be chargeable on the sale of the building. Is it possible to take out the value of land for the purposes of computing the capital gain so as to reduce the tax liability in respect of the capital gain?

— Rajiv Narula

A.According to law when a single asset like a building is transferred, the consideration has to be apportioned between the depreciable portion i.e. super structure and the portion on which depreciation has not been allowed i.e. the land. You should get the fair value of the land ascertained as on the date of sale and sale consideration should be apportioned between the sale of building and the sale of land on the basis of such fair value of the land. You may seek help from a decided case on the subject reported in 162 Taxman 167 (CIT v. Yamuna Syndicate Ltd.).

Am I entitled to claim deduction?

Q.I own a house which I had constructed by taking a loan from a bank. I have given this house on rent as I am living with my parents. Am I entitled to get the deduction of the interest paid on the loan raised from the bank as well as towards the repayment of the house building loan which I took from the bank?

— Dinesh Kumar

A.In case of a let out property, the entire amount of interest is deductible under Section 24 of the Act and the ceiling of Rs 2,00,000 for a self-occupied house is not applicable. In view thereof, you are entitled to the entire amount of interest paid/payable as deduction against the income from house property. You are also entitled to a deduction for the amount paid towards the repayment of the house building loan which you have raised from the bank. However, the claim for the deduction for the repayment of the principal amount has to be within the limit of Rs 1.50 lakh specified by Section 80C of the Act.

Limit for investing in bonds

Q.This refers to a query published in these columns (dated April 4). It was informed in the reply that “NRIs can purchase bonds to save tax payable in respect of capital gain arising on the sale of the house. However, the investment is permissible to a maximum extent of Rs 50 lakh.” My queries are:

Is this limit as per sale of house/ property?
Is this limit as per the financial year ?

for the total period for which one remains an NRI.

I will also like to know what will be the time limit within which capital gain bonds have to be purchased. Is it till the end of a financial year in which the transaction took place or within six months of the transaction. Can one spread the bonds purchase to two years to buy bonds limit to Rs 50 lakh in each of two years. — krishan dev uppal

A.Your queries are replied hereunder:

Section 54EC of the Act is a beneficial Section and provides that capital gain would not be charged if an investment is made in tax-saving bonds within six months of the date of transfer of a capital asset. A limit of Rs 50,00,000 was introduced by Finance Act 2007. A proviso to the Section clarified that investment made on or after April 1, 2007 by an assessee should not be more than Rs 50,00,000 during any financial year. This enabled assessee to claim investment to the extent of Rs 1 crore in case the long-term capital gain covered two financial years. For example, a long-term capital gain arising on sale of a capital asset in December would cover two financial years as prescribed period of six months would end in June. Another proviso has been inserted by the Finance (No.2) Act 2014 to the aforesaid Section according to which investment made by an assessee in such bonds from long-term capital gain arising from transfer of one or more capital assets during the financial year in which such capital asset or assets are transferred as well as in the subsequent financial year does not exceed Rs 50 lakh. A literal interpretation on the basis of language used in the proviso would mean that a limit of Rs 50 lakh will apply to the entire capital gain arising on the transfer of a capital asset or assets in a financial year for the purpose of claiming the exemption under the aforesaid Section.
Tax on capital gain is chargeable on the transfer of a capital asset during a financial year. Therefore, the limit of Rs 50 lakh would be applicable in respect of a capital assets transferred during a financial year.
The aforesaid limit is not applicable only to non-resident Indians but is applicable to all the assessees who have earned capital gain on the transfer of a capital asset during a financial year. Therefore, the question of the limit being applicable to an NRI for the period for which he remains NRI would not arise.