How much tax my mother will have to pay?

How much tax my mother will have to pay?

Q.An LIG flat was allotted to me in 2008 by GMADA in Mohali. The cost of the flat was Rs 9,35,000. As I spend a lot of time abroad, I had transferred this flat in my mother’s name in year 2013. Now a prospective buyer has offered Rs 36,00,000 to buy this flat. After taking loan he will make the payment as below:

By cash: 23,00,000 

By draft: 13,00,000 

Total: 36,00,000 

My queries are as under: 

Will the capital gain be long-term ot short-term. How much tax will my mother have to pay if the deal happens?

How and where I should invest this amount?

What is the time limit for utilisation of Rs 36 lakh received from the buyer? — Usha Agnihotri

A.It has not been indicated in your query whether the flat which was allotted to you in 2008  was transferred to your mother by virtue of a gift deed or not. It is, therefore, presumed that it was transferred to your mother through a gift deed and that the amount of Rs 9,35,000 was paid to the development authority in 2008. Replies to your query are based on the said presumption. 

Capital gain arising on sale of such flat would be treated as a long-term capital gain. The indexed cost of the flat would be Rs 17,36,658.  The amount of long-term capital gain would be Rs 18,63,342.  She will have to pay tax @20.6 per cent amounting to Rs 3,83,848.

The net amount after the payment of tax can be invested in the manner you decide looking to the present cash requirement by you.

The amount of capital gain can be utilised for purchase of a residential house within one year before or two years after the date of sale or can be utilised for the construction of a residential house within three years after the date of sale of the flat so as to save tax payable on the amount of capital gain. You can also save tax by utilising the amount of capital gain for the purchase of tax-saving bonds within six months of the date of sale of the flat.

GPA formalities to be completed in India

Q.An Indian NRI residing in Canada wants to execute a GPA for his residential property/land and building situated in Punjab in favour of his close relative living in Punjab. Kindly clarify the following points:

 The period within the GPA requires embossing after arrival in Punjab. 

How much stamp fee is required for embossing of GPA in Punjab? 

Which is the competent authority in Punjab for embossing of documents executed in foreign countries?

Does the GPA executed abroad need registration also after its embossing in India? 

Does the GPA executed abroad need embossing only or registration only or both i.e registeration and embossing in India? 

Please guide about Indian statutory provisions for documents executed in foreign country as per following Acts:

Section 18 of Indian Stamp Act and Section 26 of Indian Registration Act. — PL. Sharma

A.Your queries are replied hereunder:

A General Power of Attorney which has been executed outside India is required to be registered within four months after the arrival of the documents in India.  Embossing of adhesive stamps on such Power of Attorney is a process of registration, and therefore, once the registration is done, embossing would be the natural culmination of such registration.

The fee for such registration has to be ascertained from the Sub-registrar’s office where such registration is to be made.

The competent authority is Sub-registrar who has the power to register various documents executed for the transfer of property and such other documents as are required to be registered under the provisions of the Registration Act 1908.

The provisions of registration as explained above are in accordance with Section 26 of the Registration Act 1908. Section 18 of the Indian Stamp Act, however , requires that every instrument chargeable with duty executed out of India, and not being bill of exchange or promissory note, may be stamped within three months after it has been first received in India. A harmonious interpretation of the above provisions should be that stamping of such documents for the purpose of the above Act has to be done within three months but its registration can be within four months of the arrival of the document in India.  However, as the issue involves interpretation of the two laws dealing with the similar subject, it would be advisable to consult a lawyer with regard to the aforesaid provisions. 

Fight for your legal right

Q.My father expired in August 2011. Before his demise, he wrote a Will dividing his property equally among six children. This will be executed after the demise of our mother. Last year my mother also expired and now my brothers are trying to sell this property wothout my consent. My queries are:

How can I stop them from selling this property?

What can I do to get my share? — Arundhati

A.It is presumed that the Will executed by your father contained a clause that the property shall be inherited by his six children equally and it was to be operational after the death of his wife i.e. your mother. 

You have to send a legal notice to your siblings asking them not to sell the property without your consent and also approach court of the competent jurisdiction for obtaining an injunction against the proposed sale.      

No buyer should purchase the land without your consent because sale deed will have to be signed by all the legal heirs.  In case a buyer makes a mistake you should approach the court for declaring the document executed for sale as null and void.

Defining blood relations in property papers

Q.Who all are included in blood relation category as per the recent notification issued by the Government of Punjab on November 3, 2015 regarding the exemption of stamp duty on transfer of immovable property? Does it include the spouse and children of brother, sister, son, daughter, daughter, grand son and grand daughter? Can I transfer some part of my land to my father’s real brother as blood relation as per the above said notification with no stamp duty? — Dr Prem Sharma

A.The blood relations as defined in the Notification dated May 7, 2014 issued by the Punjab Government include children, grand children, brothers and sisters. Your father’s real brothers would not be covered within the term “blood relations” in accordance with the aforesaid Notification. You will, therefore , have to pay stamp duty in case land is transferred by you to your father’s real brother.

Do we need to pay transfer fee to the housing society?

Q.We have a flat in CHS in Mumbai in the name of my mother for which I was nominated 100 per cent in 2007 by my mother and witness signed by my father and nomination form received by the CHS secretary (form appendix-14). My mother expired in 2013. Now my father prepared all documents for transfer of the flat in my name with an NOC from himself and my brother. When we submitted the documents to the society they said that if it’s a gift deed then we don’t have to pay anything but if its a transfer then Rs 25,000 has to be paid to the society as transfer fee and a covering letter from my father is also required as he becomes the legal heir after his wife's death. Do we have to pay the transfer fee as the property is being transferred to the nominee (in blood relation) and what should be written in the covering letter and who should provide it (me or my father).— Sudheer

A.The society must have demanded the transfer fee in accordance with the rules formed by it.  This is a common feature in Mumbai and in my opinion you should abide by such rules and make the payment of transfer fee. The society has asked you to file a covering letter from your father.  This is because your father is also one of the legal heirs of the property that was owned by your mother. Accordingly, in my opinion, the covering letter should be provided by your father wherein he should point that he has no objection in transferring the flat in your name as the proposed transfer is in accordance with the desire of your mother.

Limit on loan against property 

Q.Kindly clarify whether a limit taken by farmer (RCC) or limit taken on properly (LAP) or trading limit is to be shown in income tax returns. Whether amount deposited or withdrawn from RCC, LAP or trading limit is to be shown in income tax returns and how much amount can be deposited/ withdrawn under rules. How much amount may be given to son, daughters, mother and how many times can be given in a year, which exempted from income tax. — Gurdip Singh Bindr

A.Your queries are replied hereunder:

It is presumed that reference to the limit in the query is with regard to the loan limit from a bank against a security of agricultural land or urban property and the loan so obtained is to be utilised for the business of the assessee. The amount of outstanding of the loan is required to be shown in the income tax return in the columns where details with regard to the Balance Sheet of the assessee are to be given under head “secured loans”.

The deposits and withdrawal in such account are not to be shown in the income tax return.  There are no rules laid down under the Act with regard to deposit or withdrawal of amount from such account which is being operated after obtaining such limits.

Any amount can be gifted by an assessee to his son, daughters and mother.  There is no limit up to which the amount can be gifted to the aforesaid relatives. Gift can be given as many times as may be decided by an assessee.