Transferring property to daughter-in-law

S.C. Vasudeva

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Q.I want information related to transfer a property from mother to son’s wife. Can we transfer property via inheritance Will, or should we gift it? Which one is a better and less expensive option?

—Ashish Kulkarni

A. It would be advisable for your wife to make a Will in favour of her daughter-in-law in respect of her share in the property. The gift would involve payment of stamp duty on the market value of the property. As against this stamp duty is not leviable for inheritance through Will. In the circumstance, the making of the Will in favour of daughter-in-law will be a better option.

Stamp duty charges on lease deed

Q.Kindly let me know the stamp duty and registration charges levied on a lease deed to be registered for a period of 33 years in Punjab.

—Raj Kumar Gupta

A.Stamp duty is payable on registration of lease deed for the period of 33 years at 6 per cent of the amount of consideration. The registration charges are 1 per cent of the consideration. But you will need to verify the exact amount from the department concerned for any extra levies added recently.

Can sale proceeds be transferred to NRIs’ accounts in US?

Q.My son-in-law and his mother are NRIs living in USA. They own property in Chandigarh, Mohali and Amritsar. They want to sell all these properties. How can the tax liability on the sale proceed be calculated and can they transfer the whole amount in their accounts in USA?

— S.S. Ghuman

A.Your son-in-law and his mother can sell their properties in Chandigarh, Mohali & Amritsar. Presuming that these properties have been held for more than three years by your son-in-law and his mother, the amount of capital gain in respect of such property will be computed by taking into account the cost of these properties. Such cost will be indexed taking into account the year of purchase as the base year for which the cost inflation index has been notified and the same will be indexed to the year of sale for which also the cost inflation index as per the Government Notification would be available. The indexed cost plus the amount of expenditure incurred wholly and exclusively in connection with such sale would be deducted from the sale price. The remaining amount would be the amount of capital gain. At present, the amount of such capital gain is taxable @20% plus education cess of 3% thereon. The amount realised on the sale of properties should be deposited in NRO account of your son-in-law and his mother. The amounts so deposited after payment of due taxes can be remitted to USA to the extent of $2,50,000 per financial year without any permission from Reserve Bank of India.

Can I claim exemption for the bulk payment made in the house?

Q.I had acquired a house property in July 2006 and sold it in April 2014. I realised a capital gain on this say “X” (post indexing) In between, in 2010 I had acquired a new residential property for which I got the possession in July 2014 i.e. just after selling off my first property. So I spent a substantial amount of the profit I realised from sale of the first house to make pre-payment for the new house along with interior and deposit of for water, maintenance which is greater than “X”. As per recent amendment in Section 54 introduced in Budget of 2014, it seems the capital gain can be invested in residential property to gain capital exemption. So my question is can I claim exemption for the bulk payment made in the house. The only flip side is that I bought the second house before four years of selling this property. — sudeep

A. Section 54 of the Income Tax Act, 1961 (The Act), provides that in the case of an assessee being an individual or Hindu Undivided Family, the capital gain which arises from the transfer of a long-term capital asset being a residential house, the income from which is chargeable under the head "Income from house property" and the assessee has within a period of one year before or two years after the date on which such transfer took place, purchased or within a period of three years after that date constructed one residential house in India then the amount of capital gain so utilised for the purchase or construction of the house shall not be chargeable to tax. On the basis of the facts given in the query it is observed that you had purchased a residential house in 2010, possession of which was received in July 2014. It is also observed from the facts given in the query that substantial amount of capital gain realised on sale of the first house was utilised to make pre-payment for the new house. It may be added that it has been held by the courts that there is no necessity of a live link between the amount realised on the sale of the old residential house to have been utilised within one year before the transfer of old house for purchase of a new residential house. Therefore, in case you can prove that the amount equivalent to capital gain or in excess thereof, was utilised for purchase of new house between May 2013 and April 2014 it may be possible to claim the exemption under the aforesaid Section.

Tax liability on temporary loan for buying a plot

Q. I am a government employee and want to purchase a plot by taking non-refundable advance from my GPF account. For taking advance from my GPF account, I've to submit a registered byana/ikrarnama in original to my employer. My queries are:

• I have to register byana at the price as quoted by the seller (market price), but government rate of the property is less. While undergoing registry work of the plot I've to make payment as per the price declared in registered byana not as per government rates. Is it mandatory (after registered byana) for me to get the plot registered as per the price declared in byana or can it be done as per prevailing government rates?
• I'm doubtful of receiving advance from GPF before the deadline (date) as mentioned in byana, and will get plot registered by taking financial help from some friend/relative, will this attract any tax liability on me or my friend/relative from whom help has been sought?
• After receiving advance from GPF, can I return money to my friend/relative without attracting any tax liability to both parties?
• Is there any implication while giving utilisation certification in respect of GPF advance to my employer? As GPF amount will not be received before deadline and purpose has to be solved by taking external help or is there any way out? Kindly suggest.

— Subhash Nath

A.Your queries are replied hereunder:

• The registration of the plot should be carried out at the price which is being paid to the seller. It is mandatory to get the registration done on the basis of the circle rate where the consideration being paid is less than the circle rate. In this it would not be essential to get the registration at the circle rate as payment being made by you is higher than the circle rate.
• There would be no tax liability in case loans are taken from your friends or relatives for purchasing the plot. Such loans should, however, be received by account payee cheques from persons, who can confirm that such loans have been given to you. They should be able to give such confirmations with their Permanent Account Number and complete address.
• You can make repayment to your friends or relatives for the loans taken from them. Such repayments should, however, be made by account payee cheques and the confirmation be obtained from them that the repayment of the loan raised from them has been made. There would not be any implication with regard to giving the utilisation certificate in respect of GPF as the amount has in fact being utilised for the purchase of plot for which the loans had been raised temporarily so that the payment for purchase of plot could be made on time.

Do I have to get plot registered at circle rates?

Q.My cousin has a property, which is over 90-year old.  They are four brothers. Two of the brothers were not married and the fourth one had taken money for his share earlier. Now my cousin's father and other brothers are all deceased and he wants to get the property transferred in his name. What would be the procedure? — Harendra kumar

A.The property being very old it is doubtful whether your cousin will be in possession any record which would establish ownership of the house in favour of the four brothers or their father. In case the same is available, it would be advisable to obtain a succession certificate so that legal title to the house in name of your cousin is confirmed. A lawyer should be consulted for getting the needful done in this case.