Tax tips : Sister’s share in property

Q. My mother owned a residential house and I am living with her along with my family. However, she passed away recently without writing a Will. Now my sister has claimed a share in the said residential house. Can she claim her share in the said property?

santosh mehta, sangrur

According to the provisions of the Hindu Succession Act 956, in case of death of a married Hindu Female dying intestate i.e. without writing a Will, the property in her name will be inherited by the sons, daughters and her husband. On the basis of the facts given in the query, the residential house owned by your mother would be inherited by you, your sister and your father.  In view of the provisions of aforesaid Act your sister can legally claim her share in the residential house which was owned by your deceased mother.

Q. My father had inherited a residential house from my grandfather through a Registered Will executed in  2005.  The said property was duly mutated in my father’s name in 2007 on the basis of the said Will.  The residential house had been constructed by my grandfather somewhere in 1990s.  Now, my father intends to sell the said residential house and buy a new one in another locality.  What would be the nature of the capital gain on the sale of a residential house?

ramesh mittal, kurukshetra

In case of an inherited property, the period for which the previous owner held the property, is taken into consideration for computing the period for which a property has been held.  According to the provisions of Income-Tax Act 1961 (The Act) as amended by the Finance (No.2) Act 2024 a short-term capital asset means a capital asset held by an assessee for not more than 24 months immediately preceding the date of its transfer.  The assets held for a period longer than this are considered long-term capital assets. On the basis of the facts given in the query, the residential house was constructed by your grandfather in 1990s.  Therefore, taking into consideration the period for which the residential house was held by your grandfather as well your father, the same would be considered as a ‘long-term capital asset’ as the same has been held for more than 24 months.  Any capital gain arising on the transfer of such a capital asset would be treated as a long-term capital gain. In case your father buys another residential house, he would be entitled to claim exemption from the taxability of the amount of capital gain to the extent the same is utilised for purchasing another residential house. This exemption is, however, limited to the extent of Rs 10 crore only.

Q.I entered into a Development Agreement with a builder for constructing residential flats on a plot of land held by me in my name.  In lieu of the construction of the flats on the said plot, I would be entitled to receive three residential flats out of the total six flats allowed to be constructed on the said plot.  Will the capital gain arising on such a transfer be taxable in the year in which the possession of the constructed flats is handed over to me or in the year in which occupancy certificate is issued by the Municipal Authorities.

ojas wadhwa, panchkula

On the basis of the facts given in the query, the capital gain should be taxable in the year in which the possession of the constructed flats is given to you and not in the year in which the occupancy certificate is issued by the authorities.  This proposition is also supported by a decision of the Bangalore Tribunal in ITA No.  775/Bangalore/2024.