• Capital gains account scheme to repay loan

Dear Sir, 

Situation:
My wife and my retired father-in-law want to buy an Apartment as joint owners. The property will be used for self-occupancy. 
My wife is an earning member and Father in law is with nominal income a retired pensioner. 
My Father in law has an apartment which he is planning to sell in 6 months time and reinvest that money in the new apartment. 

We have finalized the new property already and paid the booking amount. Now we need to take a loan to do the rest 90% payment as per schedule. My wife is not eligible for the entire loan amount and neither her father. 

However, If I become a co-applicant we are eligible for the required loan amount.

Query:
Should my wife and I be the loan applicants for this property; 
register the property on our names and later use the funds which we get by selling my father in law's old property to repay the entire loan?

Or 

Should we apply for the loan on Me and my Wifes name; Register the property on 3 names, Myself, My wife and Father in law. Then use the funds which we get from my father in law's old property to repay the entire loan?

Which is the best option to save on long-term capital gains tax here? What would the best option to close out the entire loan in 12 to 18 months? 

Note: 
I only need to be a part of this deal just to be eligible for the loan amount. Otherwise, our preference is to buy the property in my wife's and father in law's name.
Asked 7 years ago in Property Law
Religion: Hindu

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4 Answers

Section 54F of the Act provides that if a tax payer invests the sale proceeds received from the sale of any capital asset for buying a residential property; the long-term capital gains on sale of the property would be exempt.

2) The Delhi High Court observed that section 54F does not require that the new residential property should be purchased in the name of the tax payer; it merely says that the tax payer should have purchased / constructed a ‘residential house’.

3) hence property should be bought in joint names of your FIL , your wife and you

4) your FIL can invest the sale proceeds and purchase of property in joint names and claim benefit under section 54

5) loan repayment can be done later

Ajay Sethi
Advocate, Mumbai
95198 Answers
7607 Consultations

5.0 on 5.0

1) bank would insist that all 3 owners apply for loan jointly

2) bank would be reluctant to sanction loan if only you and your wife apply for loan

3) sale proceeds should be invested in purchase of flat . it can be used for repayment of loan

Ajay Sethi
Advocate, Mumbai
95198 Answers
7607 Consultations

5.0 on 5.0

Should my wife and I be the loan applicants for this property;

register the property on our names and later use the funds which we get by selling my father in law's old property to repay the entire loan?

If your income and your wife's income combined shall make you eligible for loan, you may both become co-applicants or even joint owners.

Utilising your father in law's funds is a different subject, you can take it or not will depend on the situation prevailing in your side.

Should we apply for the loan on Me and my Wifes name; Register the property on 3 names, Myself, My wife and Father in law. Then use the funds which we get from my father in law's old property to repay the entire loan?

If the property registered on three names, then all the three can be applicants for loan as joint applicants.

Which is the best option to save on long-term capital gains tax here? What would the best option to close out the entire loan in 12 to 18 months?

Dont put all the aspects together in the same basket. The long term capital gains shall be only if you intend to sell the property after having purchased it and have got registered on your name.

You have not even availed loan, then what is the necessity to ask for discharge of loan so soon.

You can ask the bankers for a short term loan and its rate of interests.

T Kalaiselvan
Advocate, Vellore
85398 Answers
2235 Consultations

5.0 on 5.0

If we do the sale deed of the new property in the name of 3 people e,g FIL, Myself and my wife; do we also need to apply for a loan as 3 co-applicants?

All the three buyers can apply for loan jointly.

Will SBI bank allow only 2 co-applicant e.g Me and my wife? or This type of agreement is not allowed? e.g 3 owners and 2 loan applicants?

The SBI or the institution which lends the amount shall have its own set of rules in this regard, you my verify the rule book and can apply for loan accordingly.

Also, can we still claim benefit under section 54 by investing the entire 50Lac sale procceeds towards home loan repayment?

Section 54 of income tax act may be applicable only to the person who is entitled to this. If you have not sold the property then you cannot avail the benefits.

T Kalaiselvan
Advocate, Vellore
85398 Answers
2235 Consultations

5.0 on 5.0

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