Hello,
there is no legal impediment in exercising this option.
I would just advise you to be the co-owner in any of the property purchased in your mothers name.
Regards
Sell and buy a property
Hello Experts, Need your advice on this.I have a property which is in my mother’s name and planning to sell it off. The sale value is close to 1.2Cr. I would like to invest this amount in a new property in a different city in India on my name or jointly with my mother.The following is my current scenario . 1.The current property will be sold and the amount will be received by my mother in 4 phases over a period of 1 year which incurs long term capital gain without taking into Cost Inflation Index. 2. The new property costs 85L and the possession is due for dec18. 3.My plan is to pay an initial advance of 10L. 4.Take a loan of 40L from bank. 5. Pay the remaining 35L as a whole once I get the phase 1 amount. 6.Close the loan account by repaying completely through phase 2,3,4 amounts. Could you please let me know if this a viable option from legality?Also it would be great if you can suggest better options. Thanks for the help in advance!
Asked 8 years ago in Property Law
Religion: Hindu
14 Answers
Please note any investment made from a property sold will not attract tax if you purchase new property within period of two years.... suppose if you invest instead of your mother you may need to pay tax.... so better get new property registered in her name....and if you avail loan please ensure that surety will be your mother so that she can pay the amount on your behalf for new property
1) your mother can invest the sale proceeds of Rs 1.20 cr in purchasing property in joint names and claim benefit of long term capital gains
2)the capital gains have to be invested by your mother within period of 2 years
Hi, it is a wise investment
The line of action that you have devised is perfectly alright and there is no illegality in it.
However to calculate the LTCG Tax it is advisable to consult with a Tax professional.
try to manage the transaction without taking loan. if you don't take loan, you will be entitled to get tax benefit for 85L as you are purchasing a house property by selling another. if you take the loan you will loose benefit of house building loan for income tax or capital gain tax for loan amount.
Sir, your planning for selling the old property and buying the new property is good. I would advice you to go ahead with this plan but with the permission of your mother. However while selling the property try to get the money at one time.
Hope my reply helps you.
The option is completely viable. Make sure that the lending Bank should not charge penalty for pre payment. Get the loan from the who may not charge any penalty on making the pre payment.
seems ok
Section 54 of IT act gives relief to a taxpayer who sells his residential house and from the sale proceeds he acquires another residential house.
The asset transferred should be a long-term capital asset, being a residential house property. Within a period of one year before or two years after the date of transfer of old house, the taxpayer should acquire another residential house or should construct a residential house within a period of three years from the date of transfer of the old house. In case of compulsory acquisition the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional).
You can follow the procedures laid down in law for the purpose and also consult your auditor on further issues to play a safe game.
Thanks for all your responses. It really helped. I missed to add few details and some recent developments : 1. I am an NRI living outside India for more than a year. 2. The timing when I can sell the property and purchase a new one is not completely in sync. 3. I have booked the Apt with myself as being the primary applicant and my mother being the co-applicant. 4. Property sale is still in the initiated state. 5. Taken the loan for 80% of the amount by again applying as primary borrower and my mother and father being other co-borrowers. 6. Bank mentioned that the loan account can only be NRE since my mother and father are not salaried and hence I have to be the primary borrower. 7. EMI payments will happen from NRE account. My only question that remains is when the sale of the old property happens, can I use it for part-payment of loan with tax completely exempted under Section 54F of IT act? If not what is the amount of tax do I or my mother needs to pay? Please note that bank has confirmed that there will be no penalties if I make part-payments. Thanks again! Much appreciated.
Asked 8 years ago
Your mother can use sale proceeds of property in purchase of new property
You can use the funds to repay partly the bank loan
Consult a local CA
You cannot claim total tax exemptions please contact a chartered accountant for the necessary reliefs.
You may please contact a local CA to get appropriate and exact information with regards to this.
Though definitely your mother can use the amount that has been obtained out of the sale to purchase the new property.
Regards
As far as sale of property is concerned, the original purchaser shall be eligible for the benefits under tax exemption rules.
Your parents being co applicants are not eligible for tax exemption out of the sale consideration amount in any manner.
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. This benefit is available only to an individual.
A person wanted to shift his residence due to certain reason, hence, he sold his old house and from the sale proceeds he purchased another house. In this case the objective of the seller was not to earn income by sale of old house but to acquire another suitable house.
Thus the exemption is allowed for purchase of new property alone and not for repayment of loan of any other property.
With effect from assessment year 2015-16 exemption can be claimed only in respect of
one residential house property purchased/constructed in India. If more than one house is
purchased or constructed, then exemption under section 54 will be available in respect of
one house only