Gifting property to sister
Q. I have a property (residential) in Mumbai which is in my name. I would like to transfer this property to my sister (married now) as a gift. Please advise what is the procedure for this. The property is approximately 550 sq ft built up area. — Hemant
A. There are two options available to you whereby the residential property in Mumbai can be transferred to your sister. These are:
(a) You can make a gift to your sister. This will involve execution of a gift deed which will have to be registered with the Sub-Registrar and would attract stamp duty which would be payable on the basis of market value of the residential property. The property in such a case would be transferred to your sister after the execution of the gift deed and mutation thereof in her name in the revenue records.
(b) You can make a Will in her favour whereby the residential property in Mumbai would be inherited by her after your death. In such a case the property would be mutated in her name after your death. Such an action would involve a delayed transfer but would be less expensive.
What is the stamp duty for Leave-and-License agreement?
Q. I would like to give my property on Leave-and-License agreement for residential purposes only. My property is located in Ludhiana. I would like to know the stamp duty and registration charges for the same. — S.S. Ram
A. Leave-and-License Agreement is generally executed for a period of eleven months. Stamp duty payable for such an agreement may please be checked up with a civil lawyer practicing in Ludhiana. Such an agreement is not required to be registered. It should, however, be notarized so as to authenticate the date of execution of the agreement.
Saving tax on capital gain
Q. I had bought a house in July 2004 for Rs7 lakh. Now I want to sell it off. I am hopeful of getting between Rs90 lakh and Rs1 crore, as sale proceeds. In 2014 I had bought another house jointly with my wife and my brother-in-law. My queries are hereunder:
1) How much LTCG will I accrue, if I am able to sell it in the current financial year?
2) Can I utilise the money (LTCG amount) to settle the loan taken for that house as well as my part of loan taken for buying the recent house, without attracting any LTCG?
3) We have about 5 acres of ancestral agricultural land in our village and it is still cultivated. This land is likely to be acquired by the government soon. This is in our father’s name. Will the compensation amount attract LTCG tax? If yes , then how it can be utilised so as to save tax? We are two brothers and two sisters and our parents are alive. — Rajvir Malik
A. Your queries are replied hereunder:
(a) On the basis of the figures indicated in the query, the indexed cost would work out at Rs15,76,458. Assuming that the house is sold for Rs90 lakh, the amount of capital gain would work out at Rs74,23,542.
(b) You will be liable to pay tax on the amount of long-term capital gain in case the amount of such capital gain is utilised for repaying the loan taken for buying the old house property as well as for repaying the loan taken for buying the new house property. The amount of tax payable on the capital gain can be saved only if the amount is utilised for purchase or construction of a residential house property — purchase to be effected within one year before or two years after the date of sale or construction to be completed within three years after the date of sale of a residential property. Tax on long-term capital gain can also be saved by utilising the amount of capital gain for purchase of tax-saving bonds within six months of the date of sale. It may please be noted that such bonds can be purchased for a maximum amount of Rs50,00,000.
(c) The amount of capital gain arising as a result of compulsory acquisition of the agricultural land would not be taxable in case the following conditions are satisfied:
(i) such land is situated in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of Section 2; (This means that the agricultural land is situated within the municipal limits).
(ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such individual or a parent of his;
(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;
(iv) such income has arisen from the compensation or consideration for such transfer is received by such assessee on or after the 1st day of April, 2004.
Presuming that the agricultural land is situated within the municipal limits and taking into account the facts given in the query, your father seems to fulfill the above conditions, and therefore, no tax should be leviable on the amount of capital gain arising as a result of compulsory acquisition of the agricultural land. It may be added that in case agricultural land is situated beyond the municipal limits, such an agricultural land is not covered within the term ‘capital asset’. and therefore. any profit arising on sale of such a land is not taxable.
Can I purchase a residential plot to avoid capital gain tax?
Q. I had purchased a house in April 2010 for Rs33 lakh (including registry charges and broker fee) and sold the same in August 2015 for Rs60 lakh. Also I had spent Rs5 lakh in the renovation of house in 2014. Renovation included painting, wood work and some extension in building. Kindly tell me -
i) How much tax I need to pay in terms of capital gain?
ii) What certificate will I need to produce to claim renovation costs deducted from profits?
iii) Can I purchase a residential plot to avoid capital gain tax?
iv) If I have to purchase a house again, how much is time allowed to me? And can I invest this fund in fixed deposits till that time? — Ajmer Singh
A. Your queries are replied hereunder:
(a) On the basis of the figures given in the query the mount of capital gain would work out at Rs9,82,700 on which income-tax @20 per cent plus applicable cess would be payable. The amount of tax payable thereon would be Rs2,02,436.
(b) The above amount of income tax has been computed without taking into account the amount spent on renovation of the house as you have stated that you do not have any supporting evidence for the incurrence of the renovation expenditure. The renovation having taken place in the 2014, the supporting vouchers for such renovation should be an important piece of evidence and in its absence a certificate from an approved valuer may not enable you to claim such an expenditure as additional cost of the house. It may be clarified that expenditure incurred for wood work and some extension in building would be treated as renovation expenditure. In case supporting vouchers are not available for the said expenditure, you may obtain an approved valuer’s report to justify the claim of the expenditure incurred on renovation. The department may accept such an evidence provided you can prove the source of expenditure to the extent of Rs5 lakh incurred on renovation.
(c) The amount of capital gain would be taxable in case the amount is spent for the acquisition of a plot without there being an intention to construct a residential house. You can save the amount of tax payable on the aforesaid capital gain of Rs9,82,700, if the same is utilised for purchase of a residential house. The purchase has to be effected within one year before or two years after the date of sale of the old house. The amount of capital gain, if not utilised before the date of filing of the tax return of income for the assessment year in which the capital gain arose, is required to be deposited with a bank under capital gain scheme account.
The amount so deposited can be utilised for the purchase of a residential house.
Such a deposit can also be in the form of a fixed deposit but such fixed deposit should be made under the capital gain scheme. If the amount is not deposited under the capital gain scheme account, it would not entitle you to claim the benefit of exemption from taxability of the amount of capital gain.
