I am an NRI. I am buying a property in my mother's name of 80 L of which I have paid money 30 L myself and for the remaining, my mother is coborrower in the loan of 40 lakhs. Can there be any problems of property being declared Benami?
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person paying the consideration has to be the joint owner of the property i.e. individual cannot purchase the property in the name of the parents or siblings. To satisfy the exceptions given by benami transactions it is necessary for the person paying the consideration to be the joint owner of the property. Second limb is that the consideration has to be provided by the known source, here the meaning of known source will remain the same as mentioned above.
purchase property in joint names only
If I still want to buy the property in the name of my mother only, what are my options- 1. Revert the 30 L paid by myself, gift 30 L to my mother and let her pay? 2. Go ahead with buying jointly and then gift my mother the share I hold in the property? (Is this an expensive option)
1) You can gift Rs 30 lakhs to mother and let her purchase property in her name
2) in alternative purchase property in joint names
if you execute gift deed for your share it would attract stamp duty depending upon market value of your share in property
The property if purchased by your mother alone then she can show the amount you have given to her for this purchase as gift and can proceed accordingly, there is no legal issues involve din it, neither it will b e considered as benami transaction,.
You can also execute a gift deed in her favor to evidence this money transfer.
You can fund for the purchase by transferring your contribution of money to your mother in the name of gift and execute a gift deed in her favor for this amount clearly mentioning that this gift is given to your mother for the purchase of the said property.
Purchasing the property on joint names and then transfer to her name will be an expensive method, instead you can gift the amount to your mother, which is not taxable.
Go ahead with purchase. No repercussion.
- According to the Benami Transactions (Prohibition) Amendment Act 2016, unless you are a joint holder in the property with your mother, you may face legal consequences for indulging in Benami Transactions.
- Hence, if is necessary for the person paying the consideration to be the joint owner of the property.
- The second option is better for you.
It will not be treated as benami till your sources are known you can execute gift deed ior any other deed with mother for the same
Dear client,
The term "Benami" refers to a situation where a property is held by one person but the consideration for it has been provided by another person. In your scenario, where you've contributed 30 lakhs for a property that's being bought in your mother's name, with her being a co-borrower for the loan of 40 lakhs, there might be some considerations to be aware of. Ensure that the source of the 30 lakhs contributed by you is legitimate and can be proven. If questioned, you should be able to provide evidence of where this money came from. If your mother is a co-borrower for the loan of 40 lakhs, it's crucial that the loan agreement clearly states the contributions made by each party. If your contribution of 30 lakhs is documented and acknowledged within the loan agreement, it could help demonstrate the legitimate nature of the transaction. If it can be proven that the property was purchased with the intent of it being jointly owned or as an investment in your mother's name due to her being the co-borrower, it might not be seen as a Benami transaction.
Both options you've mentioned involve gifting money or property to your mother. Let's break down each option:
1. Reverting the 30 lakhs and gifting it to your mother: You could retract the 30 lakhs you've already contributed towards the property and gift it to your mother. However, this might involve certain tax implications and procedures. In India, there might be a tax on gifts above a certain value (as per the prevailing tax laws), and you might need to consider the implications of this transfer.
2. Buying the property jointly and then gifting your share to your mother: This might be a more straightforward option initially. You could purchase the property jointly with your mother and then transfer your share of ownership to her as a gift. Again, gifting of property might have tax implications, and it's essential to ensure compliance with relevant laws.
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