PoA norms for NRI’s property

S.C. Vasudeva

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Q.My daughter-in-law had booked a flat with a builder in Mohali. The possession of the flat is likely to be offered sometime in June, 2016. My daughter-in-law is an NRI and she may not be in a position to come to India at the time of possession. I understand that she can give a power of attorney in my favour so as to avoid delay in taking possession of the flat. I am living in Delhi. Kindly advise as to the formalities that would be required to be completed by her (outside India) and by me in Delhi for executing of the PoA in my favour. My daughter-in-law is stationed in London. Can I complete all the formalities in Delhi itself and or I shall have to go to Mohali for execution of the PoA?   — Raj Kumar

A.Your daughter-in-law will have to execute a PoA in London in your favour and sign the same in the presence of the officer concerned of the Indian Embassy based in London. She will have to check up with the Embassy the designation of the officer who is authorised to attest such PoA. The officer will attest her signatures. The PoA so executed will have to be adjudicated in India so that the same can be accepted by the authorities in India. It can be adjudicated at Delhi also but it will be advisable to get it adjudicated in the office of the Sub-Registrar having jurisdiction over Mohali.  You will have to visit Mohali to take the possession of the flat on behalf of your daughter-in-law.

Transferring property to sister

Q.I have a flat which is in the name of me and my mother. The registration has been done in the name of both of us. We would like to transfer the property in favour of my sister. Will this attract any registration/ stamp duty and what are the provisions of transferring the flat to my sister? — Raj Samuel

A.The transfer of property in favour of your sister would amount a gift and accordingly a gift deed will have to be executed. Such a gift deed will have to be registered with Sub-Registrar’s office and stamp duty will have to be paid on the market value of the property which is being gifted.  Punjab government has provided a relief in respect of the payment of stamp duty in case immoveable property is transferred to a close relative.  You can avail this benefit if the house property you intend gifiting to your sister is situated in Punjab.

Should I buy property in joint names?

Q.I am a pensioner and my elder son is employed.  I have one flat in my name in another city and my wife, a homemaker,  is the nominee. Now I intend to buy a second flat in Kharar/Mohali. Kindly advise me as to how I can save tax on capital gain? Should I buy the second flat jointly with my elder son and wife? 

Can we use the sale proceeds to repay the bank loan to avoid capital gain tax? 

If we avail bank loan in my son or in my name or both of us,  then what will be the minimum period for which we can not sell the flat? — M.S. Kalsi

A.It seems you intend to buy second flat near Kharar/Mohali by utilising the sale proceeds of the flat held in your name in another city.  It is presumed that the flat which you intend selling has been held for more than three years.  Replies to your queries are based on the said presumption:

• Capital gain arising on the sale of the earlier flat, if utilised within one year before the date of sale or within two years after the date of sale for purchase of a residential house anywhere  in India would  not be taxable in case the amount of capital gain so utilised is equal to or more than the cost of the new flat. It would be advisable to purchase the new flat in the same name in which the earlier flat was held.
• The payment of loan by utilising the sale proceeds of the flat would not enable you to avail any relief with regard to the payment of tax on capital gain arising on the sale of earlier flat.  
• The loan should be taken from the bank in your name as principal borrower and your son can provide a guarantee with regard to the repayment of the loan.  
• The new flat must not be sold for a period of three years from the date of purchase so as to avoid the taxability of the amount of capital gain in respect of which benefit has been availed by utilising the same for purchase of a new flat.

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Will transfer between father and son be exempted from tax?

Q. An individual got a flat allotted from the Chandigarh Housing Board in his name in Chandigarh in FY 1994-1995 at the allotment cost of Rs 8,50,000 with full payment and possession in that year. In 2015 the flat was transferred to his major son via family transfer by paying 2.5 per cent ( Rs 21,250) amount of allotment price to Chandigarh Housing Board under family transfer scheme and the flat was realloted on his son name and after that the conveyance deed was registered in his son’s name . However, no other amount was paid other than transfer fees and conveyance fees by his son. The son is studying and has no other source of income yet except some money gifted  by his father from his own income received from retirement benefits.. Now the son wants to sell or rent that flat. My queries are:

• Will this transfer be considered as gift as the flat was transferred with the intention of gift only?
• Will the rental income considered as son’s  income?
• Whether the son can claim cost of indexation from year 1994-1995 if he sells the flat?
• The profit will be considered son's income or clubbed with father's income? — Gavinder Chanji

A.Your queries mare replied hereunder:

• The transfer in the records of Chandigarh Housing Board in favour of your son will be treated as a gift to him.  The stamp duty on the execution of conveyance deed in favour of your son having been paid, no further amount would be payable for such a gift under the provisions of the Income-tax Act 1961 (The Act).
• The rental income would be considered as the income of your son.  It will be taxable  in his hands since he is major.  
• In case your son decides to sell the property, he should be able to claim the benefit of indexation from the year 1994-95 for the purpose of computation of long term capital gain on the basis of the following decisions of the High Courts: 

(a) CIT vs Manjula J. Shah (2012) 204 Taxman 691 (Bombay)

(b) Arun Shungloo Trust vs CIT (2012) 205 Taxman  456 (Delhi)

(c)CIT vs Gautam Manubhai Amin (2013) 218 Taxman 319 (Guj)

d) The amount of long -term capital gain arising on the sale of the house would be treated as income of your son because he is major.  It will not be clubbed with your income.

Can inherited house be sold without transfer?

Q.I have two properties in an urban area of Punjab, one plot worth Rs 40 lakh  and one house worth about Rs 1crore.

My son is an NRI and  I want to  transfer the plot in his name during my life time  and house through a registered Will. My queries are:

• What will be the stamp duty, infrastructure  charges  for getting the plot transferred in his name.
• In case of house whether he can sell the house after my death, directly  or he would  have to get the house also transferred in his name in order to sell it.  — O S Gill

A. Your queries are replied hereunder:

nThe plot can be gifted to your son. The gift so made will enable you to transfer the plot in his name.  Thereafter, the mutation can be done in his name in respect of the said plot. At present no stamp duty is leviable on gift made to close relatives in accordance with the notification dated May 7, 2014 issued by Government of Punjab, Department of Revenue Rehabilitation and Disaster Management.  You can, therefore, take benefit of the said notification.  It may be added that registration fee, infrastructure cess etc. will continue to be levied @4 per cent in urban areas and 1 per cent in rural areas on the value of the plot which is gifted to your son.

nNo stamp duty is payable in case the property is inherited by a legal heir on the basis of a registered Will, which takes effect after the death of the testator. The purchaser would like that the house is mutated in the name of your son before it is sold to him. Therefore your son should get the house mutated in his name after the Will becomes effective. There should not be any problem at the time of sale of the house after this procedure is adopted.Your daughter-in-law will have to execute a PoA in London in your favour and sign the same in the presence of the officer concerned of the Indian Embassy based in London. She will have to check up with the Embassy the designation of the officer who is authorised to attest such PoA. The officer will attest her signatures. The PoA so executed will have to be adjudicated in India so that the same can be accepted by the authorities in India. It can be adjudicated at Delhi also but it will be advisable to get it adjudicated in the office of the Sub-Registrar having jurisdiction over Mohali.  You will have to visit Mohali to take the possession of the flat on behalf of your daughter-in-law.

Daughters’ share in property

Q.Please clarify about the share of daughters in self-acquired property, in the light of recent Supreme Court judgment denying share to daughters whose father expired before 2005 amendment in ancestral property. My father purchased a property jointly with his brothers around 1935 and built residential houses at Shimla. The property stands devided and the percentage of share is shown in MC records. My father expired in 1981. We are four brothers and four sisters. Two of the brothers have expired. The building is on rent but no rent has been received by  any of us and we also don’t have the physical possession after the death of our mother in 2009. The building had been given on rent by our mother and she used to receive the rent. — Dial Singh

A. The amendment to Hindu Succession Act 1956 made in 2005 was with regard to the joint Hindu family property also known as  the ancestral property.  As far as the self-acquired property of a Hindu male is concerned, there is no change with regard to the provisions of Hindu Succession Act 1956 as it stood before the amendment in the year 2005. The general rules of succession in the case of a Hindu male are laid down in Section 8 of the aforesaid Act.  Your father died in 1981. According to the aforesaid provisions the property would have devolved in the said year on the relations specified in Class I of the Schedule.  

Among the heirs specified in the Schedule, those in Class I shall inherit property simultaneously in equal shares. 

In the first instance, therefore, the inheritance after the death of your father will have to be decided. It is not possible to specify the shares of each one of you as status of legal heirs as on the date of death of your father is not indicated in the query.  

Share of each one of you in the property on the death of your mother will have to be decided on the basis of provisions of Section 14 of the aforesaid Act as her share in the property will be divided between the sons and daughters in accordance with the provisions of the aforesaid Section.