No if mother is investing the net amount and her name is there as joint purchaser then in that case she wont be liable to pay the capital gain tax. Further the reciept of total amount paid by mother should be there for record.
Purchasing a property in joint name and the tax implications for it
I have a property in the name of my mother. We are planning to sell it for Rs 1 Cr with a capital gain of Rs 60L. We intend to purchase a property for Rs 1.5 Cr, where Rs 1 Cr obtained from sale of property will be paid by my mother and Rs 50 L will be paid by me (Home Loan + savings). The new property purchased hence will be in the joint name of my mother and me. Will it lead to a capital gain on hands of my mother?
Asked 7 years ago in Taxation
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7 Answers
If the capital gain from the sale of the property is invested in another purchase or construction of another property, the exemption is allowed u/s 54. If the capital gains arising from the sale of property are invested in specified bonds, each co-owneris entitled to claim deduction under section 54EC up to Rs 50 Lakh
Your mother would be reinvesting capital gains received by her on sale of old property in purchase of property in joint names
2) she would not have to pay any capital gains tax even though property is bought in joint names
3) 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’.
1) No, it will be exempted 100% from Tax - capital gain for your mother.
Capital gain of your mother is 100% exempted
Exemption under section 54 is available when the capital gains from the sale of house property are reinvested into buying another house property.
Exemption under Section 54F is available when there are capital gains from sale of a long-term asset other than a house property.
Entire sale consideration and not only capital gain should be invested to buy a new residential house property must be purchased to claim this exemption.
The new property can be purchased either one year before the sale or 2 years after the sale of the property.
To avail capital gains tax exemption, your mother only needs to invest the capital gains and not entire sale proceeds
Also to arrive at capital gains value, you can deduct charges like brokerage, legal, cost of purchase, etc and balance would be your capital gains which can be invested to buy a new house
So your mother will get full benefit of capital gains exemption
Also since you would be a co-purchaser, it will be advisable to clearly mention in sale deed, the amounts contributed by your mother and you respectively towards purchase price
This will avoid any complications in future
Section 54 of Income Tax Act. Section 54 of the Income Tax Act provides the seller of a residential property with relief from capital gains tax, if the proceeds from the sale are used to acquire another residential property.
Since your mother has invested the entire capital gains in the new house property she need not pay any tax against the capital gains.
