• Capital gain will be applicable or not

Mr Bhavesh Thakker (sole owner), had bought a property in Mumbai suburban area admeasuring 220 sq ft carpet area in 1997 at approx Rs 2 lacs.. His CHS decided to go for redevelopment and development agreement was signed in 2009. The redevelopment might get completed in the year 2018, Jan admeasuring 460 sq ft carpet area (approximate value expected is rs 70 lacs).

Now Mr Bhavesh Thakkers son (Mr Mayur Thakker) and his daughter in law (Mrs Priyanka Thakker) decide to buy a new flat in Dec 2017, admeasuring 750 sq ft carpet area (costing ~ rs 1 cr). (hereafter called as new flat) in joint name of MR Bhavesh, Mr Mayur & MRs Priyanka, first name being Mr Bhavesh followed by Mayur and Priyanka. In order to buy this new flat, Mayur, Priyanka & Bhavesh apply for a home loan, first applicant being priyanka. Priyanka and MAyur will pay the monthly emi. It has been decided that Mr Bhavesh will pre-pay a part of the home loan by selling his property admeasuring 460 sq ft maybe within 6 months of buying this new flat. Apart from this prepayment (by selling old property), Mr bhavesh will pay any emi nor make any other investment like stamp duty registration or margin money in the new flat. All this contribution will be made by Mayur & Priyanka.

Whether Mr Bhavesh has to pay any capital gain tax under this scenario?
Request to kindly provide detailed explanation under income tax act.
Asked 7 years ago in Property Law
Religion: Hindu

Ask a question and receive multiple answers in one hour.

Lawyers are available now to answer your questions.

3 Answers

You will pay capital gain tax online long term capital gain and the amount realise less then indexed cast of the property at the time of acquisition the difference between sale consideration minus indexed cost will be the long term capital gain and tax@ 10% the amount invested in the property should be reduced from the capital gain and the balance amount is taxable

Vimlesh Prasad Mishra
Advocate, Lucknow
6852 Answers
23 Consultations

If a new property is bought (in joint names) by a spouse using the sale proceeds of another flat in order to claim the capital gains tax exemption; will the investment done in other spouse’s name be entitled to exemption under the Income Tax Act?

In one of the recent situations that came up before the Delhi High Court; an individual had sold an inherited flat and earned some long term capital gains. At the time of filing his income tax returns, the tax payer had claimed a deduction under section 54F of the Income Tax Act (‘the Act’) on the ground that the sale proceeds were invested in the acquisition of a residential home in the joint names of himself and his wife. 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.

the High Court observed that for the purposes of section 54F, the new residential house need not be purchased by the tax payer in his own name nor is it necessary that it should be purchased exclusively in his name. The High Court further observed that the assessee in the said case has not purchased the new house in the name of a stranger or somebody who is unconnected with him. The same has been purchased only in the name of his wife. The fact that the entire investment for the house has come out of the sale proceeds and that there was no contribution from the assessee’s wife is undisputed. In view of the same, the High Court allowed the exemption from long-term capital gains in favour of the tax payer.

This clearly indicates the the exemption can be claimed even in the jointly purchased property.

It may be noted that section 54F of the Act requires that in order to claim exemption, the residential house should be purchased by the tax payer, but does not stipulate that the house should be purchased in the name of the tax payer only. Including wife’s name in the property for any other social / economic reasons should not stand in the way of exemption granted by the said provision of the Act. These sections promote impetus to house construction and as long as this purpose is served; other factors should not matter.

T Kalaiselvan
Advocate, Vellore
87004 Answers
2335 Consultations

DOCUMENTS NEEDS TO EXAMINED IN DETAIL OTHER WISE MY SUGGESTION WILL LEADS YOU WRONG PRESUMPTION.

Kishan Dutt Kalaskar
Advocate, Bangalore
6179 Answers
490 Consultations

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer