Ask THE EXPERT PERSONAL TAX
DNMUM418048 | 7/12/2018 | Author : Suraj Nangia | WC :324
There is no tax on property gifted to children
Personal Finance
Me and my wife own two adjacent flats in joint ownership. In one flat I am first owner and she is second, and vice versa in the second flat. We now want to sell both flats to two different buyers. My wife is employed and files income tax returns regularly. I am a retiree and stopped filing income tax returns since eight years. We propose to immediately purchase similar adjacent flats. What would be capital gains tax liability? Suppose we gift the flats to our major children who are independently earning and filing income tax returns, what is the tax liability? Surendran Pillai
In case of joint ownership of the property, capital gains are chargeable to tax proportionately in the hands of both the owners depending on the share of each
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joint owner in the property. Capital gains shall be computed (for each co-owner separately), by reducing from sale consideration, the indexed cost of acquisition and indexed cost of any renovation along with any expense incurred in relation to the sale of the property. Indexation is available only in case the asset is a long term capital asset, that is, its period of holding exceeds 24 months. Further, capital gains computed can be claimed as exempt from taxation if the sales consideration is used for purchasing a residential property within two years after the date of transfer or constructing the residential property within three years from the date of transfer. Each co-owner shall get this benefit separately. Thus, capital gains arising from the sale of adjacent flats jointly owned by you and your wife can be claimed as exempt by purchasing the
property and such benefit shall be available to you and your wife separately in proportion to the respective share. Alternatively, if you gift the house properties to your children, then no tax will be charged as transfer of property as gifts to relatives are exempt from taxation.
Suraj Nangia Partner, Nangia Advisors LLP
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