Can wife’s name be added as joint owner before sale of house?

S. C. Vasudeva
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Q.I have a house in my name in Haryana. It was constructed in 1995-96 at a total cost of Rs 4.9 lakh. However, I do not have supporting bills etc except the sale deed of two plots on which the house has been constructed. My queries are:

1) Can the name of my wife be added as joint owner in the above house and would it help for the purpose of LTCG if I sell the house.

2) From the sale proceeds of the above house.

• Can I/we invest in bonds in the joint names and the maximum amount and within how many months of sale?
• Can I/we out of the balance amount purchase a plot and construct a house in Punjab and within how many months of sale. Or
• Can I/we purchase a house in Punjab and within how many months of sale?
• Can the sale proceeds be deposited in our joint savings account till it is invested in bonds/utilised for purchase of house etc. — Madan Parashar 

A.Your queries are replied hereunder:

• It is not possible to add the name of your wife as a joint owner without either transferring one half of the ownership to her by selling such portion of the house or by gifting one half portion of the house to her.  Both the aforesaid steps would involve payment of stamp duty.  In case of a sale of the one half portion of the house, your wife will have to make the payment to you for such portion.  The consideration thereof would be on the basis of the market value of the house.  
• It may also not be possible to get the desired benefit of taxation because in case one half portion of the house is sold to her, any profit arising on the sale of such a portion would also involve taxability of capital gain arising on such a sale. Further, the stamp duty on the gifted portion would also be chargeable on the basis of the market value.  The proposed action may thus not provide you any benefit in terms of the cost involved. The sale of her portion again within three years of the purchase, would involve payment of tax on short-term capital gain, if any arising on such a sale.  The joint ownership of the house at this stage would not be advisable as no benefit would be derived as far as the taxability of long term capital gain arising on the proposed sale of the house is concerned.
• In case you sell the house, the amount of capital gain arising on such sale should be utilised for purchase of tax-saving bonds within six months of the date of sale of the house.  Such bonds can be purchased for a maximum amount of Rs 50 lakh. It would not be advisable to purchase the bonds in joint names. Instead your wife can be named as a nominee in the application made for subscribing the bonds. 
• You can utilise the balance amount after payment of tax or making the investment as suggested hereinabove to save the tax on the amount of capital gain, towards purchase or construction of a residential house in Punjab.  In case the amount of capital gain is less than Rs 50 lakh and you have invested the amount of capital gain in tax-saving bonds within six months period, there is no requirement to comply with any time limit for purchasing or constructing a house. In case the amount of capital gain is to be utilised for purchase or construction of a residential house instead of purchasing the bonds, or in case the amount of capital gain is in excess of Rs 50 lakh invested in tax-saving bonds, the utilisation of the amount of capital gain or the balance amount as the case may be, should be made within one year before or two years after the date of sale in case of a purchase and within three years after the date of sale in case of a construction of a residential house. In case the amount of capital gain is not so utilised before the date of filing the tax return in respect of the year in which the amount of capital gain arose, the unutilised amount is required to be deposited in a bank under capital gain scheme account.  The amount so deposited can be utilised for purchase or construction of a house.

• The sale proceeds can be deposited in the bank account in joint names with your name as the first holder of the account. The amount so deposited can be utilised for the purpose of purchase of bonds or purchase or construction of a residential house as aforesaid.

Tax saving on proceeds from acquired land

Q. My land has been acquired by government.  Now I am told that I either have to buy property or bonds to save tax on LTCG. They have cut TDS but have not yet given the papers. Could you please advise as to what are the rules for acquired land and how to save tax or what bonds to buy or what other options are there in case I don’t want to buy property or these bonds? — Deep Dass

A.It is presumed that the land which has been acquired is not an agricultural land.  The reply to your query is, therefore, based on the said presumption.  In case of  compulsory acquisition of land, the capital gain is required to be dealt in the following manner:

• n The capital gain computed with reference to the compensation awarded in the first instance or, as the case may be, the consideration determined or approved in the first instance by the Central Government or the Reserve Bank of India shall be chargeable as income under the head “Capital Gain” of the previous year in which such compensation or part thereof, or such consideration or part thereof, was first received; and
• n The amount by which the compensation or consideration is enhanced or further enhanced by the court, Tribunal or other authority shall be deemed to be income chargeable under the head  “Capital Gain” of the previous year in which such amount is received by the assessee:
• Provided that any amount of compensation received in pursuance of an interim order of a court, Tribunal or other authority shall be deemed to be income chargeable under the head  “Capital Gain” of the previous year in which the final order of such court, Tribunal or other authority is made; 
• n Where in the assessment for any year, the capital gain arising from the transfer of a land is computed by taking the compensation or consideration referred to in clause (a) or, as the case may be, enhanced compensation or consideration referred to in clause (b) and subsequently such compensation or consideration is reduced by any court, Tribunal or other authority, such assessed capital gain of the year shall be recomputed by taking the compensation or consideration as so reduced by such court, Tribunal or other authority to  be the full value of the consideration.

The amount of tax on capital gain arising on compulsory acquisition of a capital asset can be saved by either investing the amount of net consideration towards the purchase or construction of a residential house within the specified period or by utilising the amount of capital gain for purchase of tax- saving bonds within six months of the date of transfer of the capital asset.  The bonds can be purchased for a maximum amount of Rs 50 lakh.  The bonds which can be purchased are issued by National Highway Authority of India or Rural Electrification Corporation Limited.  There is no other option available under the provision of the Income-tax Act 1961 (The Act) for saving the amount of tax on long term capital gain arising on the sale of a long-term capital asset.

How much tax do I need to pay on compensation amount?

Q. I had purchased some land in December 2012 for around Rs 6 lakh. However, this land was acquired by government this year. I was given compensation cheque for Rs 42 lakh for this. 

I would like to know my tax liability for aforementioned capital gain. Also guide me about reducing the tax liability. — Rohit Kumar Garg

A.On the basis of the facts given in the query the amount of short-term capital gain would work out at Rs 36,00,000.  The said amount would be included in your total income and will be taxable at the rate applicable to such total income.  The Act does not provide any avenue for saving tax leviable on the amount of short-term capital gain.

How can I claim my share in father’s property?

Q.I want to know the status of my share in a house that belonged to my parents who have died intestate. The situation is that my brother, his wife and their  children were living in that house, before my brother passed away. Now my brother’s wife and children are living there.  So how do I get about claiming my share in the house. I am currently living in New Zealand. How can I get my rightful claim in the property that is located in Vidynagar close to Anand, Gujarat, India. — Pratixa B Patel  

A.The facts given in the query do not indicate whether the house was duly mutated in revenue records after your father’s death in  your name as well as in your brother’s name —  being the legal heirs of your father.  Presuming that it was not so mutated, you will have to, in the first instance, get the house mutated in the revenue records in your name and in your sister-in-law’s name as your brother has also expired. After the mutation is done you can claim half of share in the house property.  You should, therefore, approach the municipal authorities for getting such mutation effected.