Proceeds from sale consideration
My NRI maternal uncle had purchased a land in Bangalore in 2004. The land was purchased entirely by his savings. But at the time of registration he included my and my spouse name in the sale agreement. Now he is planning to sell the land. We have already engaged a buyer. The buyer is not agreeing to give the entire payment in uncle's name but insisting that the total sale consideration be splitted across all three of us as the land is in joint name. We (I and my wife) are not interested to take any money from this sale consideration. However, since my uncle is in urgent need of money we have agreed to take our portion of share and then do a bank transfer or make a cheque payment of received amount. Please advice us how to do this transaction as we do not want any tax implication to come to us. We have already received the draft payment deposited it into our respective banks, and wish to do the transfer at earliest, without getting into any short or long term tax issues.
Please advice us
Asked 3 years ago in Property Law from Bangalore, Karnataka
1) your uncle has only 1/3rd share in land . balance is owned by you and your spouse .
2) on receipt of sale consideration you would be liable to pay long term capital gains tax on sale of your share in the property
3) you can avoid long term capital gains tax by reinvesting your share in sale proceeds within period of 3 years
4) consult your Chartered accountant in this regard
1. The arrangement you have made is already over,
2. You have shown the consideration as your income,
3. Let your Uncle execute an affidavit stating that the said flat actually belonged to him since he had paid the entire consideration but had added your name out of love and affection which you have reciprocated by returning the consideration received by you to him,
4. There would have been no problem had the buyer paid the entire consideration to your Uncle by mentioning it in the sale deed to be signed by you and your wife as the two sellers out of thye three sellers.
Hi, it is need not necessarily that amount must be shown to your name and the buyer wanted to safeguard his interest.
2. Even without receive the amount you can also execute sale deed and your presence in the sub-registrar office is very much necessary and you have to execute sale deed it is sufficient.
3. If the buyer did not agree then take the amount in your name and later paid to your uncle but one thing you have to pay the capital gain tax.
As you have already received sale consideration being joint owners, you can not escape your liability of tax whether you transfer it to uncle or not.Position would have been different if you had relinquiished your share in his favour before sale of property.
Advocate, New Delhi
1. Is your mother alive?. If so, you & your wife can gift the shares in the land to your mother through gift deed and in turn she can gift that to her brother through gift deed.
2. Stamp duty is meagre if the gift deed is executed between Family members. Family in relation to the donor for this purpose means husband, wife, son, daughter, daughter-in-law and grand children .
3. If you can recall the DDs from the bank, if it has not been encashed yet, will solve your tax problems.
1. What the buyer is doing is right. Any wise buyer would insist on the consideration being splitted among all the joint owners.
2. Since you have held the property for more than 3 years the profit will become Long Term Capital Gian (LTCG). LTCG is taxed at a flat rate of 20%. If the person’s total income apart from the LTCG is less than the zero slab, then only the LTCG over the zero slab attracts tax at 20%.
3. The buyer has to deduct TDS at 1% of the total sale consideration if the total consideration paid or payable is more than Rs 50 lakh INR.