S.C. Vasudeva.
Q.My mother got a house constructed after my father’s death on a plot bought by my father. My younger brother assisted my mother in the construction process. My elder brother was away then, pursuing his studies. Mother managed the funds with enormous difficulties. Her source of income was my father’s pension and she also worked as a teacher. She even had to borrow money from relatives and friends which she paid back on her own. Again, brothers did not make any financial contribution as they were not earning at that time. Both the brothers got married and lived in that house for almost 20 years. The elder brother earns well and has built a lavish house without the knowledge of my mother. He shifted to the new house with his wife and children but locked a room in my mother’s house. He refuses to unlock the room saying that he has kept some of his valuable belongings there. My mother is aged now and needs a room for herself as she is livings in the lobby area. My query is:
Does my elder brother have a right to lock the room?
Does he have any right on this house if my mother doesn’t want to give him any share in the property? — ABC
A. Your elder brother has no right to lock the room as he can’t claim any share in the property which was inherited by your mother from your father in her own right. Your mother has absolute right to gift the property or make a Will in favour of any one. Her decision can be questioned only if the Will is proved to have been executed under undue influence. Being a family problem, it should be sorted out with the help of elders in the family and in case it is not possible to arrive at a settlement, the alternative available is to approach the court for seeking requisite order of the court for eviction of your brother from the property.
Can we invest LTCG in business?
Q. I have just sold a property in Chandigarh. It is a joint property in my and my brother’s name. It’s a transfer case. I sold it for Rs 52 lakh, but in white for Rs 35 lakh. Basically Rs 17.50 lakh is in my name and Rs 17.50 lakh in my brother’s name. We are also buying another property but there we have taken loan. We have made a down payment of Rs 11 lakh for that and the rest of money we are going to use in our business. How can we save tax? — Lovish Verma
A. Presuming that the property sold by you is in the nature of a residential house, the capital gain arising on such a sale should be utilised for the purchase of a residential property within two years after the date of sale or construction should be completed within three years after the date of sale of the old residential house which was jointly held by both of you. It is not possible to compute the amount of capital gain as figure of cost and the year of the acquisition of the property have not been given in the query.
This being a case of jointly owned property each one of you will have to reflect his share of the amount of capital gain as part of his total income. The reply to your query is based on the presumption that each one of you is having ½ share in the property.
In case the amount of your share of capital gain is more than Rs 5.50 lakh, being your share of the amount utilised by you for purchase of the property, the balance amount should be deposited by you in the bank under capital gain scheme and such amount should be utilised towards the purchase or construction of a residential house within the time limit specified as above. This procedure would enable you to save tax on your share of the amount of capital gain arising on sale of a residential house. In such a case it will not be possible for you to use the balance amount of your share of sale proceeds for your business. However, in case the amount of capital gain is less than Rs 5.50 lakh the balance amount of your share of sale proceeds can be utilised in any manner you decide.
Helping son and daughter-in-law in buying a house
Q.I am a 79-year-old retired employee of a PSU. My son and his wife are both doctors and want to buy commercial property for rental income in Chandigarh/Gurgaon and need some financial help from me. The plan is to have a jointly owned property in which my son has 2/3 share and daughter-in-law 1/3. my son wants Rs 5 lakh and daughter-in-law needs Rs 15 lakh to purchase this property. Both are income tax payees and propose to include their respective rental income in their respective returns. I am also an income-tax payee and am in position to give them the requisite monetary help by cheque.
Kindly let me know the tax implications in the proposed arrangement on each of us and how to go about it gifts or loans. What will be the paperwork required for this. I am not interested charging any interest from them for giving thre money.— R.K. Saini
A.A gift of Rs 5 lakh to your son would have no tax implication. However, a gift of Rs 15 lakh to your daughter-in-law will have a tax implication to the extent that any income arising from such gifted amount would be clubbed with your income. It would, therefore, be advisable to give a loan of Rs 15 lakh to her. There is no need to charge interest in case the amount is paid from your own funds meaning thereby that the loan is not advanced out of borrowed funds.
A gift to your son can be made by a simple letter for which an acceptance letter should be received from him. The gift should be made by an account payee cheque. The letter for gift should contain your address and Permanent Account Number. The acceptance letter should also contain said details in respect of your son. A loan to your daughter-in-law can be made by execution of a loan agreement with her. Such loan should, however, be returned in accordance with the terms contained in such agreement so as to prove the genuineness of the transaction.
Tax rebate on home loan for wife
Q. I have a query. We have a plot in the name of my wife alone and she is a housemaker not having any source of income. We want to take a loan from the bank for the construction of the house on the plot. But the bank says that it will not be able to give the loan to her as she is not having any regular income. I am a retired teacher and a tax payee. So if I join her as a co-borrower , will I be able to get tax rebate under Section 80C or 80 D. If yes, then what do we have to do in order to avail tax rebate under any of these Sections as the plot is in her name and not in my name? — Dr Rakesh K Garg
A. It has been indicated in the query that your wife does not have any income of her own. It is not evident from the query whether her ownership of the plot has been accepted by the department. Presuming that it has been so accepted, you can be a co-borrower but deduction for the installment paid towards the repayment of loan shall be allowed to her, being the owner of the plot.
Tax implications on capital gain
Q.I need some clarification regarding applicability of capital gain on the following facts.
I purchased a residential plot on February 28,2008 in my name for Rs 5,50,000. Since, I got a power of attorney in my favour. Brokerage paid was Rs 10,000. This was purchased with a loan from a bank. Interest paid was about Rs 54,000.
Later on, when a compulsion of registration was imposed in Punjab in 2012-13, I got the registration of this plot done in my wife’s name without any consideration on March 12, 2013. I spent about Rs 1,03,980 on registration and other legal expenses. On January 1, 2016, I sold that plot for Rs 10,00,000. Brokerage paid was Rs 15,000.
I would like to know the applicability of short/long term capital gain on this transaction. Whether, it will be in my name or in my wife’s name?
Further, in October 2015, my son took a housing loan from his employer in joint name with my wife to buy a shop-cum-flat. With the loan amount, the complete consideration of SCF was paid. The registration and renovation expenses to the tune of Rs 2,75,000 were spent from plot’s sale proceeds. The registration of SCF was done in my wife’s name. Please clarify the tax implications on the complete transaction. — Jaspal Singh
A. Your quieries are replied hereunder:
a) The query does not indicate as to when possession was taken by you. Presuming that the possession of the plot was taken on the date of registration, profit arising on the sale of the plot will be treated as a short-term capital gain. However, in case you had taken the possession on 28.2.2008 and the date of execution of power of attorney was in the year ended March 31, 2008, such profit will be treated as a long- term capital gain. The amount of profit arising on sale, whether short-term gain or long-term capital gain shall be taxable in your hands as the funds for the purchase of plot have emanated from you.
b) The transaction relating to the purchase of shop-cum-flat was effected by borrowing funds by your son from his employer in the joint name with his mother. The property having been registered in the name of his mother, the transaction should be treated in the nature of a gift by a son to his mother. Such a gift is not exigible to income-tax. Your wife will , however, be liable to pay tax on the rental income earned from letting out the property.
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