• Selling a flat which is obtained by Gift Deed in India (Mumbai)

My sister and Brother-in-Law brought the flat in Mumbai on 17th Oct, 2009 in 15 lacs.

They gifted the property to my Mother on 5th April, 2013. My mother paid the Stamp Duty and Registration Fee.

Now, my mother wants to sell her property in 35 lacs.

I have few questions:

1. Is she eligible to sell the property?

2. If she sell the property now in 2014, will it be consider as LTCG or STCG?

3. What will be consider as Capital Gain? 
 a. Is it selling price (35 lacs) - cost price of my sister (15 lacs) = 20 lacs
 b. Is it selling price (35 lacs) - cost price of my mother (0 lacs) = 35 lacs

4. What will be the date of purchase be consider to calculate the Capital Gain?
 a. Is it the date of purchase by my sister (17th Oct, 2009)?
 b. Is it the date of purchase/gifted by my mother (5th April, 2013)?

e.g.
 If she sells the property in 35 lacs, how much will be the tax.

a. Since it is not the Sale Deed, will the purchase date be considered as 17th Oct, 2009 and she has to pay tax of LTCG (around 20%) on 20 lacs profit? it means 2 lacs.

b. If not a, will the purchase date be considered as 5th April, 2013 and she has to pay tax of STCG (around 30%) on 20 lacs profit? it means 6 lacs.

c. If not a and b, will the purchase date be considered as 17th Oct, 2009 and she has to pay tax of LTCG (around 20%) on entire 35 lacs rupees (since the purchase price is zero, is the net profit be consider as entire selling price i.e. 35 lacs)? it means 7 lacs.

d. If not a,b and c, will the purchase date be considered as 5th April, 2013 and she has to pay tax of STCG (around 30%) on entire 35 lacs profit (since the purchase price is zero, is the net profit be consider as entire selling price i.e. 35 lacs)? it means 10.5 lacs.


Please let me know the rule and section in the law, which reflect this case of property transaction


Best Regards,

Ajay
Asked 7 years ago in Taxation

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1 Answer

As per your query what I understand is that your sister and her husband had purchased a flat on 17.10.2009 for a consideration of RS. 15 lacs.  ON 05.04.2013 they gifted the said flat to your mother (being the mother and mother in law of donors) by a registered gift deed. Now your mother being the owner of the flat wants to sell the flat for an expected consideration of RS 35 LACS.

  • Yes, she (your mother) being the legal owner of flat is eligible to sell the property.
  • If she sells the property in the year 2014, the gain earned on transfer of flat shall be considered as LONG TERM CAPITAL GAIN and taxed accordingly. As per provisions of sec 49(1) of the I T ACT 1961 IN CERTAIN SPECIFIC CASES / TRANSACTIONS the date of acquisition  by the previous owner (in your case your sister and her husband) is to be considered as the date of acquisition for the transferor (your mother) .   
  • In case of your mother the gain shall be treated as long term capital gain and the capital gain (i.e. the gain after reducing the indexed cost of RS. 15 lacs as in the year 2014 ) shall be taxed @20% as per provisions of sec 112 r.w.s 45 of the Income Tax Act 1961 of the I T Act.

  •  The date of acquisition in your case shall be 17.10.2009 as explained herein above.

Sunil Makhija
Advocate, Mumbai
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