How can I claim share in HUF property?

S. C. Vasudeva         

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Q. My great grandfather was an agriculturist and migrated to India in 1947 after the division of the country from (now) West Pakistan leaving behind his agricultural land and residential property there. He filed a claim for both agricultural land and residential property. After due verification, as compensation, he was allotted agricultural land and some amount of cash (claim) for residential property left in West Pakistan. My great grandfather purchased a big chunk of plot from the cash received as  compensation. He gifted a portion of this plot to my grandfather and equally to other sons. Later on, the agricultural land was disposed off and the money was equally shared with my grandfather and his brothers. My grandfather built a house on his share of the gifted plot and my father and his two brothers contributed in the construction of the house.

My grandfather made a Will in favour of  one of my uncles who is occupying 1/3 portion of the house. My grandfather wanted to change the Will but died before he could do so. 

My query is:

• Can I claim a share in the house as great grandson as a member of HUF (Hindu Undivided Family)?
• Can we consider this property as ancestral property?
• Do my father and his second brother have equal right on this house as a member of HUF (Hindu Undivided Family)? — saurabh bakshi 

A. On the basis of the facts given in the query  it is presumed that the house property which was gifted to your grandfather was an HUF property.  Your grandfather, therefore, could not have made a Will in respect of the entire property in favour of one of his sons.  He could have made a Will in respect of his share in the house property.  The property after the death of your grandfather, therefore, should be treated as a HUF property.  Replies to your queries  given hereunder are after taking into account the facts stated hereinabove:-

n  You can claim a share in the house property which was constructed by your grandfather by seeking a partition of the HUF.

n  This being an HUF property, can be treated as an ancestral property.

n  It is not possible to determine the shares of any of the co-parceners till such time a partition of  HUF takes place.  According to the provisions of the Act, an HUF property should be partitioned in its entirety so as to get an approval from the tax authorities under Section 171 of the Act.  Therefore, in case of total partition, the property will have to be divided by meets and bounds in equal shares between the sons of your grandfather and your grandmother.  In case the death of your grandfather took place after September 9, 2005, daughters of your grandfather, if any, shall also have an equal share in the property in accordance with the provisions of Hindu Succession Act 1956.  You can claim share in the HUF property which comes to your father’s share by seeking a partition of the smaller HUF comprising your father, mother, brother(s) and sister(s).

It may be added that the issue raised by you has legal implications, and therefore, all past records will have to be looked into in  minute detail.  It would, therefore, be  advisable to seek opinion of a civil lawyer before taking any action on the basis of replies given above.

Tax liability on financial help from friends and relatives

Q.My wife and I are planning to buy a flat in Chandigarh for Rs 50 lakh. For this purpose my NRI friend is lending me Rs 3 lakh. Apart from this a relative of my wife is helping us with another Rs 5 lakh. Kindly clarify if there will be any tax liability on me and my wife for the amount that we are receiving for the said purpose. — rajeev

A.There is no tax liability in respect of the amount received from your friend or relative towards the purchase of a house provided the same is received as a loan and repaid within a period of few years. It would be advisable to execute necessary documents for such purpose so as to avoid any complications with the tax department. The loan should be received through banking channels  and necessary confirmation, Permanent Account Number of the person advancing loan and his bank statements should be available for verification of the tax department. In case the amount is received as a gift from the two parties referred to in the query, it shall be taxable as income of the recipient and taxable under head ‘Income from other sources’ in view of the provisions of Section 56 of the Act.

Approach consumer court

Q.My relative booked a flat in Mohali with a reputed builders way back in 2008.  About 70 per cent of the money has been paid but there is no hope of getting the possession in near future. Inquiries from the builder are being met with routine excuses.  My query is that will such cases be dealt with under the provisions of RERA in 2017 or should we proceed legally without waiting for the Act to be in place?  — j s arora

A.It would be advisable for you to approach the consumer court in this regard.  It may be added that recently National Redressal Commission has allowed a relief in such cases.  You can also take recourse under RERA as and when it comes into operation.

Joint owners’ tax share

Q.A is a retired bank officer who had raised a home loan during his service and repaid it fully by paying Rs 1,20,500 during FY 2016-17. A had purchased one more house measuring about 170 sq.yd in the name of B (his married & professional daughter) & A in the ratio of 50:50 in 2016-17 with B as first name in the title deed. B has professional income of Rs 5,20,000 and is paying income tax accordingly. The house is self-occupied by  B while A is using it for parking his vehicles.

2. A is receiving pension from bank approx. Rs 4,25,000 and interest income of approx. Rs 1,87,000 and is also declaring saving Rs 1,50,000 U/S 80C of the income tax Act.

3. A & B will be repaying the house loan in EMIs worth Rs 2,00,000 in this year individually from their personal savings bank accounts. The bank will charge approximately Rs 1,20,000 as interest on new house in 2016-17.

Kindly  advise the income tax liability of A & B during 2016-17 & how they can save tax. 

— raj kumar

A.It is presumed that the house purchased by A built on land measuring 170 sq.yd is in joint names of B & A and that B has contributed to the extent of 50 per cent of the cost of the said house.  Further, that the other house owned by A is self-occupied.  Reply to your queries is, therefore, based on the said presumptions.

a) Income from house property in respect of the new house shall be computed on the basis that it is a self-occupied property as far as ‘B’ (married daughter) is concerned.  However, as far as ‘A’ is concerned  (who is  a joint owner), his share of income from house property shall be computed under Section 23 of the Income Tax Act 1961 (The Act) on the basis that the same has been deemed to have been let out. Both ‘A’ & ‘B’ shall be allowed deduction in respect of the interest paid/payable on the amount of loan borrowed  for the purpose of acquiring the house to the extent of amount interest paid/payable by each one of them. The income from self-occupied property being nil, in case of ‘B’, she would be able to claim the loss under the head “Income from property” to the extent of interest paid.  However, in case of ‘A’ the amount of loss, if any, shall be adjustable after computing income from house property on deemed rental basis.  In case of ‘B’ loss would be adjustable against her professional income.  In case of ‘A’ loss, if any, shall be adjustable against his salary income.  This adjustment is allowable under section 71B of the Act. 

b) It is not possible to compute the tax liability of both A and B as the figure of interest paid out of the amount of Rs 2,00,000 (being the total amount of  installment) has not been indicated. It may be added that B can save tax by depositing Rs 1,50,000 in the schemes specified under Section 80C of the Act.

Accepting sale proceeds in NRI’s accounts

Q.My daughter is an NRI living in USA for over 10 years now. She had purchased property in India and paid in installments.  The money had been debited from her accounts as under: 

From NRE a/c= Rs 23.6 lakh, NRO a/c= Rs 7.12 lakh, Cash= Rs 3.42 lakh. 

In case she sells the property now, say for Rs 50 lakh, how should the money be apportioned in NRE and NRO accounts. At the time of making the payments she had her NRI account with ICICI Bank in her single name which has been closed now. A new joint NRI account has been opened in SBI with first name of her husband. My queries are:

How will the money be credited to NRE and NRO accounts in SBI now? 

What steps should be taken in finalising the sale of the property? Please advise. — a.k. jain

A.It is presumed that the amount of cash spent by your daughter for the purchase of property amounting to Rs 3.42 lakh was also out of her withdrawals from the NRO account.  It is also presumed that she is still maintaining her independent NRO account.  Reply to your queries is, therefore, based on the said presumptions:

(a) The amount of consideration received on the sale of a property should be deposited in her NRO account in the first instance because the amount will be received in Indian rupees and therefore, the deposit thereof, can be made only in NRO account.

(b) The amount of consideration which was paid out of her NRE account can be returnable  on the basis of the evidence to be produced by her to the bank that the amount to the extent of Rs 23.6 lakh was withdrawn from her NRE account towards the purchase of property.

(c) She would also be able to repatriate  the balance amount of sale proceeds  which stands deposited in NRO account as it is possible to remit a sum of $10,00,000 in a financial year without any approval from RBI.