Can land be registered in the names of more than one persons?

Q. I am a senior citizen having annual income Rs 6 lakh by way of pension. I had entered into an agreement in 2005 for the purchase of land for Rs 21 lakh and paid Rs 10 lakh as earnest money in the name of my wife. She is a housewife.

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However, the other party has denied that it had any agreement with me or had accepted any earnest money. The case is sub judice at the moment.

On the orders of HC the land had to be registered in June 2016 and the balance sale of consideration of Rs 11 lakh had also been deposited.

My queries are:

1- Whether land can be registered in more than one names?

2- The land in question is agriculture one and situated in village. If I opt to sell the said land immediately at the prevailing price of Rs 50 lakh will there be capital gain? If yes then how much would be this gain?

3- What should be done to avoid/minimise tax liability? — S. Prasher

A. Your queries are replied hereunder:

a) The land can be registered in more than one name. In case it is registered in your name as well as in your wife's name, you will be considered the owner of the property because the funds for the purchase of the property have emanated from you.

b) Any profit arising on the sale of plot immediately after the registration would be treated as a short-term capital gain. Any excess of the sale price over the cost price shall be taxable at the normal slab rate applicable to you. In other words, the amount of short-term capital gain would be added to your total income and the income-tax would be leviable on such total income in accordance with the applicable rates.

c) There is no provision in the Act which enables a tax payer to avoid/minimise tax in respect of short-term capital gain.

Can I take a loan from my mother?

Q. I am government employee and am seeking pre-mature retirement on compassionate grounds. I want to purchase a flat in Noida. Can I get loan from my mother, who is an income tax payee to purchase this flat?

What formalities are required to get the loan from my mother?

What will be the rate of interest to return loan in installments? — S.K. Sharma

A. Your queries are replied hereunder:

a) You can borrow funds from your mother for the purchase of flat in Noida.

b) The borrowing should be by means of an account payee cheque. It would be advisable to have a letter from your mother with regard to the grant of loan specifying the rate of interest payable on such a loan as well as the period for which the loan is being granted by her to you.

c) Your mother can grant loan without interest provided the amount is advanced by her out of non-interest bearing funds, meaning thereby that the amount advanced to you is out of her resources which do not have any element of borrowing by her on which she is paying interest. In case the amount has been advanced from funds on which she is paying interest, she should charge interest which should not be less than the interest being paid/payable by her.

Tax on share in capital gain

Q. We have a joint property in the names of three individuals - A,B,C - and one firm D. The firm D had two partners - E and F. The partnership was dissolved after sometime by E, and F remained the sole properioter. We want to sell the property and money will be received in four or five yearly installments. My queries are about the capital gain tax. In revenue papers the firm is intact showing the names of both the partners E and F. Kindly clarify

a) Whether the share of the firm in the sale proceeds will go to the properioter F and he will be responsible for paying capital gain tax or the price will be divided between E and F as per revenue record and both will be responsible for paying capital gain tax?

b) Whether the capital gain tax will have to be deposited yearly according to share or it is to be paid after 4/5 years when full payment has been received? — S. Pritam Singh Bedi

A. Section 45(4) of the Income Tax Act 1961 (The Act) provides that profits or gains arising from the transfer of a capital asset by way of distribution of capital asset on the dissolution of a firm or otherwise shall be chargeable to tax as the income of the firm of the previous year in which the such transfer takes place and for the purpose of Section 48 of the Act (i.e. for the purpose of computing such profits or gains), the fair market value of the capital asset on the date of transfer shall be deemed to be the full value of consideration received or accruing as a result of the transfer. Accordingly, when the firm D was dissolved, the share of the property belonging to the firm D shall be deemed to have been transferred to E and F and the firm shall have to pay tax on the basis of fair market value of the property. On the sale of the property capital gain arising as a result thereof, shall be payable by A, B, and C on their share in the property and in case the sale price is in excess of the fair market value of the property as on the date of dissolution of the firm E and F shall be liable to pay tax on their share in the property which vested with them by virtue of the dissolution of the firm. The amount of capital gain would be computed with reference to the total consideration accruing on the sale of the property even if the amount of such consideration is receivable in installments.

How much tax has to be paid on rent deposited in NRO account?

Q. My daughter had purchased a flat in NCR about 10 years back with a loan from a bank. The loan has been fullt repaid. She is now an NRI and has rented out the flat. She has been filing her ITR of income in India. The rent of the flat is received in Indian currency, and is credited by tenant in her NRO account. Kindly advise regarding the income tax payable on the same and whether the bank will deduct TDS? — Nirmal Garg

A. You have not indicated in the query the amount of rent being received by your NRI daughter. It is, therefore, not possible to compute the tax payable by her on such rental income. Further, the tenant is required to deduct tax at source in case rent of the property exceeds Rs 1,80,000 per annum while making the payment of rent to her for which a certificate for the deduction of tax at source is required to be issued by the tenant. Bank has no responsibility to deduct tax on the rent being deposited in her NRO account. The bank would, however, deduct tax at source in respect of interest on the balance lying in her NRO account provided the same exceeds Rs 10,000 for the year. Tax deducted at source by the tenant and bank, if any, shall be adjustable against the total tax payable by your daughter on her total income.

Do I need to pay LTCG on selling my agri land?

Q. I own 2 acres of inherited agricultural land in a remote village of Jalandhar district. The nearest municipality is 12 km away. My forefathers have held this land for 45 years. The current circle rate is Rs 12 lakh per acre, but the market rate is above Rs 40 lakh. I want to sell the land and invest the proceeds in PO NSCs. What will be my tax liability. Will the interest earned on NSCs be taxable? — Karanjeet Singh

A. According to the facts given in the query the agricultural land is situated beyond 12 km of the nearest municipality. Presuming that this agricultural land does not fall within the notified area committee, town area committee, town committee or known by any other name or a cantonment board, which has a population of not less than 10,000, you will not be liable to pay any tax on the capital gain arising on its sale. This is on account of the fact that the agricultural land is not considered to be a capital asset if it is situated beyond the limit of 8 km of the municipal committee, notified area committee, town area committee, town committee or known by any other name or cantonment board. Any amount of capital gain arising on the sale of such a land is not exigible to tax. In case you satisfy the above requirement, you can invest the proceeds in Post Office National Savings Certificate or in any form of deposits or certificates. The amount of interest received/receivable on National Savings Certificate is taxable.