Your father is owner of apartment and will have to pay capital gains tax
2) new buyer cannot insist that payment be made to sister only
Sale of property by settlor - capital gains tax liability
My father (Settlor) executed a Deed of Settlement stating that a Flat owned by him shall after his life time and the life time of my mother shall pass on to my sister ( Settlee). This deed was registered with Registrar. Now my father is selling this flat with the consent of my mother and sister. As per Encumbrance Certificate(EC) obtained from Registrar office my Sisters name appears as Owner under a Settlement deed. However since technically my father continues to be the owner during his lifetime, it is my understanding that he will be subject to capital gains tax on sale of Flat and not my sister. Need expert opinion if this understanding is correct. Also can the new buyer of Flat insist to make payment on sale of property to my sister only as her name appears as owner in the EC ?
Asked 2 years ago in Taxation
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6 Answers
Yes it's a valid understanding
If your father had transferred the property to your sister by executing a registered settlement deed, then he has no rights in the proeprty except the life interest conditions.
Therefore legally he is not the owner hence he cannot execute the registered sale deed in favor of the buyer.
If at all he desires to sell this property then he may have to get the settlement deed cancelled by executing registered cancellation deed along with the settlee.
Otherwise he and his wife can relinquish their rights in the property executing a relinquishment deed to enable your sister to sell the property as a seller.
The sale deed will be executed with consent & sign off from Settlee and Settlor's spouse. Hence that should not be a problem. My query was on the following: 1. Since Settlement deed mentions that only after Settlor's life time and the life time of his spouse shall pass on to the Settlee, for Income Tax purpose who will be subject to Capital Gains tax ? 2. Accordingly should not the person liable to Capital Gains tax will be entitled to receive the Sale proceeds.
Asked 2 years ago
Settlor has to pay capita gains tax
2) sale proceeds will be paid to settlor
The person who is transferring the property as a seller and receiving the sale consideration amount is liable to pay the long or short term capital gains as applicable.
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1. The person who sells.
2. Yes