• Capital gains on part contribution from HUF gains

Sir We have two houses in Hyderabad one independently owned by my daughter and another in the name of HUF with myself as Karta Now we propose to sell both the houses which will generate a capital gains of two crores each after indexation (Total four crores) My questio is:
1) Can we purchase one house in the name of my daughter for Rs 4 crores and claim capital gains exemption in respect of 2 crores generated in the name of HUF and another 2 crores in the name of my daughter 
2) If sl no:1 is not possible can the Property be purchased jointly in the name of my daughter with her gains and HUF gains and claim capital gains exemption in respect of each one’s share
Kindly clarify 
With Regards 
Venkateswar Rao Ravuri 
Email: [deleted]
Asked 4 years ago in Family Law
Religion: Hindu

First answer received in 30 minutes.

Lawyers are available now to answer your questions.

10 Answers

Dear Client,

First option available, purchasing new property in the name of daughter. The assessee must not have more than one residential house other than the new one and purchase in joint name also permitted to avail exemption.

Same held by court that if someone has made the entire investment for the purchase of a new house, he is entitled to get the full benefit of the income tax exemptions, even if the property has been purchased in the name of a close relative.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

As both are different legal entities you can't merge the same. You need to claim both separately

Prashant Nayak
Advocate, Mumbai
27224 Answers
88 Consultations

4.4 on 5.0

There is no restriction as such in section 54 of IT Act that capital gains realised from sale of 2 independent properties standing in the name of 2 different assessees cannot be invested in a single property (to be purchased using the capital gains realised from the 2 properties so sold) in the joint names of the 2 assessees

but your daughter and HUF will be having undivided right in the joint property proposed to be purchased which can create complications in future when the property is to be partitioned

Yusuf Rampurawala
Advocate, Mumbai
6876 Answers
79 Consultations

5.0 on 5.0

As regards reinvestment benefit for capital gains under Sec. 54 or sale proceeds under Sec. 54F, though available for a Hindu Undivided Family (HUF), the investment should be in the name of the karta of such family

2) Ancestral property for a Hindu would be assessable only in the hands of the karta as the income of the Hindu joint family, unless there had been effective partition as between the members prior to such sale. In fact, such partition would even be required to be formally recognised under Sec. 171 by the assessing officer, if the joint family had at any time been assessed to income tax.

3) if flat is purchased for 4 crores in name of daughter out of sale proceeds of Rs 2 crores of HUF property and 2 crores of her property she cannot claim benefit of capital gains exemption for Rs 2 crores generated in name of HUF

Ajay Sethi
Advocate, Mumbai
87894 Answers
6207 Consultations

5.0 on 5.0

1.The property that belongs to your daughter shall be treated as individual property likewise if the other property was on your name alone then you can invest the capital gains to the proeprty your daughter proposes to purchase now and can claim exemption.

But the property what you sold belongs to HUF, i.e., various members of the family. You are just a karta or manager to the HUF hence you dont have rights to invest the share of of other members to your daughter's proposed new property.

The other members are also entitled to the said exemption, hence it would not be valid even they give NOC for this act, because they are shareholders of the property that has been sold by the karta of HUF.

2. You are looking for a solution which is not available in the law.

Understand the meaning of HUF property. Once the HUF property is sold then the members of the HUF are entitled to their shares in the sale consideration as a coparcenary right.

Therefore an individual's sale consideration and capital gains cannot be clubbed with the HUF's capital gains for joint purchase of an individual and the HUF (a body).

Dont complicate the simple things. Each individual can avail their share in the sale consideration amount and likewise you can invest your own share in that to invest in the property you daughter is proposing to purchase now.

T Kalaiselvan
Advocate, Vellore
78048 Answers
1543 Consultations

5.0 on 5.0

Yes that can be done

But as beforesaid, in future when property is to be partitioned, there would be issues as the shares are not specific at time of purchase

Yusuf Rampurawala
Advocate, Mumbai
6876 Answers
79 Consultations

5.0 on 5.0

All the members of the HUF have to give consent about this and physically invest the same in the proposed new purchase, besides,this issue has to be reflected in their individual ITRs also since the property has been disposed and they are allotted with their respective shar in the sale consideration amount.

Also ensure if the HUF will remain or will it be dissolved subsequently.

T Kalaiselvan
Advocate, Vellore
78048 Answers
1543 Consultations

5.0 on 5.0

Tax exemption available in joint ownership too acc. to contribution.

Section 26 of the Income Tax Act gives clear guidelines for taxation of the share of such co-owners in a building and building owned by a HUF is not a property that is owned jointly but the same is owned by the HUF in its own capacity. Thus, the income of such HUF property shall be taxed in the hands of the HUF as a separate tax entity and will not be apportioned among the members of the HUF.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

you can purchase property jointly in name of HUF and ayour daughter and claim benefit of capital gains exemption

Ajay Sethi
Advocate, Mumbai
87894 Answers
6207 Consultations

5.0 on 5.0

Hi,

You may proceed with any of the options available

Ganesh Singh
Advocate, New Delhi
6646 Answers
16 Consultations

4.5 on 5.0

Ask a Lawyer

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