• Capital gain tax

Sir, I got a property through a Gift deed from my Grand mother in April'17. I decided to go in for a joint venture with a developer to re-develop the property in lieu of floor and some cash. The developer gets to keep the rest of the two floors for selling. However, going through the details it seems that I will have to end up paying a Capital Gain tax on both the cash and the floor that I receive and it has to be paid from the day I assign the builder the Power Of Attorney. 

This has brought me to reconsider the development agreement and think about selling the property completely. Here also I have been in a bit of confusion on the type of Capital Gains I might have to end up paying, long term or short term? What would be the options to save any SCG tax, would I be able to invest on more than one property if I have SCG implications?
Asked 7 years ago in Property Law
Religion: Hindu

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7 Answers

1) In case of gifted property, the period of holding is reckoned from the date of purchase of property by the owner who has actually acquired the property,

2) since property has been received by you from gift deed from your grand mother the period of holding by grand mother would also be considered for levy of capital gains tax

3) if the said property has been held for more than 36 months, the gains, if any, shall be termed as LTCG.

4) the cost for which the property has been acquired by your grand mother shall be considered as the cost of acquisition while computing LTCG.

Ajay Sethi
Advocate, Mumbai
96806 Answers
7811 Consultations

1. This will be a short term capital gain tax for you.

2. For saving on CG Tax, investment on only one property which will be used for the purpose of your dwelling only will be allowed as per I.Tax Rule.

Krishna Kishore Ganguly
Advocate, Kolkata
27453 Answers
726 Consultations

on sale of property by you it would attract long term capital gains as your grand mother held property for 30 years

Ajay Sethi
Advocate, Mumbai
96806 Answers
7811 Consultations

moment the owners of land hand over the possession to the developer under a Joint Development Agreement (JDA), a right to receive the developed area would accrue to the owners and would result in capital gains tax liability in the hands of the owners.

In the case of T.V.Sundram Iyengar & Sons, the Madras High Court held that the right to receive the price had accrued to the taxpayer in the year of sale though the price was to be paid at future time. The taxpayer had obtained a right to receive price in that year and therefore, capital gains had arisen in that year

3) The moment the Owners have handed over the possession to the Developer, a right to receive the developed area would accrue to the Owners. It is a consideration in kind, which has a value and it can be worked out.

4)

Ajay Sethi
Advocate, Mumbai
96806 Answers
7811 Consultations

This has brought me to reconsider the development agreement and think about selling the property completely. Here also I have been in a bit of confusion on the type of Capital Gains I might have to end up paying, long term or short term? What would be the options to save any SCG tax, would I be able to invest on more than one property if I have SCG implications?

Any immovable property received by an individual from any person during any financial year (FY) without consideration, the stamp duty value of which exceeds Rs.50,000, is taxable under the head “income from other sources” in the hands of the recipient. However, an exemption can be claimed if the said property is received from a relative which includes, among others, the mother of an individual. Accordingly, there should not be any tax implications for either.

You may maintain the necessary documentation/registration with respect to the gift transaction.

Any subsequent capital gain from sale of the aforesaid property shall be taxable in your hands. The capital gain taxability in respect of property depends upon the period of holding of the property.

If the property is held for more than 36 months from the acquisition date, then the resulting gains, if any, are termed as long-term capital gains (LTCG). In case of gifted property, the period of holding is reckoned from the date of purchase of property by the owner who has actually acquired the property, other than by way of inheritance, gift, and so on.

As the property has been originally acquired by your grandmother, the period of holding will be reckoned from the date of acquisition of the same by your grandmother.

If you desire to invest in more than one property, you may not be eligible to claim exemptions under section 54 of the act.

T Kalaiselvan
Advocate, Vellore
87007 Answers
2335 Consultations

Just one last clarification, My grand mother has held the property for more than 30 year, i.e. since 1983. Hence, even after she transfers the property to me via gift deed, my liability on tax, post sale of the property would be that of a long term capital gain (LTCG), is that correct?

Your understanding is right. As the property has been originally acquired by your grandmother, the period of holding will be reckoned from the date of acquisition of the same by your grandmother.

T Kalaiselvan
Advocate, Vellore
87007 Answers
2335 Consultations

I have two last questions. As mentioned above, I had plans to go in for a joint venture with a developer where he was offering me a floor and some cash and he was keeping two floors to himself for Sale.

1) Do I end up paying Capital Gain Tax on both the floor and the money I receive or only the money?

You may have to pay the capital gain tax for the balance amount you have received.

2) Does my tax liability start on hand over of the property o the promoter? If so, is there any ways to deffer the same?

After the registration of the property into his hands and you receive the cash in hand.

T Kalaiselvan
Advocate, Vellore
87007 Answers
2335 Consultations

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