Can I sale a property which is in my name and purchase another in my wife's name to avail exemption from cap gain tax

sudhish chatterjee,

8th May 2016

Legal in Pune

capital gains on selling an old flat

capital gain tax

capital gains

capital gains on property

capital gains on sale of long-term capital assets

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Replies (3)

Hi Sudhish,
To make you clear, i am giving you an example. Suppose an individual has a long-term asset (other than residential property) & he sells it on 1st April, 2013 for Rs. 1500000. Suppose, the indexed cost of the asset is Rs. 800000 then
Long Term Capital Gain will be = 1500000 – 800000 = Rs. 700000

In order to get full exemption u/s 54 F he will have to invest the full sale consideration of Rs 1500000 in construction of a house property before 31st March, 2016 or purchase a new residential house property before 31st March, 2015. If he has already purchased a residential house property on or after 1st April , 2012 then the amount invested can be adjusted with the purchase price of this property.

Rohit Marathi, Pune

9th May 2016

Comment

According to the provisions of Section 64 of the Act any amount of income arising directly or indirectly to an assessee from an asset transferred to the spouse otherwise than for adequate consideration or in connection with an agreement to live apart shall be treated as assessee's income. In view thereof, payment to PMC on behalf of your wife would be hit by the aforesaid provisions and therefore, income arising from the apartment shall continue to be taxable as your income. In case only a part of the amount is paid, the clubbing provisions would be applicable to the extent of income arising on the amount so paid. It may not be possible for you to claim exemption under Section 54 of the Act as the residential house has to be purchased in the name of the assessee who is liable to pay tax on long-term capital arising on the transfer of a capital asset.

Sunil Kulkarni, Pune

9th May 2016

Comment

Under section-54, if a residential house is sold after 3 yrs of purchase then one can avail tax exemptions on the gains by investing them in following options-

1) A new residential property either bought within 2 yrs or constructed within 3 yrs from the date of transfer of existing property. In the case of buying a new property, the exemption is available even if it is bought within 1 yr before the date of transfer.

2) There might be a situation when you would not have decided on a new property but do not want to lock in the money in the bonds. In such instances, the money has to be deposited in a Capital Gains Account Scheme.

3) The entire capital gains will be exempted where the amount of investment in new property is equal or greater than the capital gains earned.

Gauri Shinde, Pune

9th May 2016

It's true Gauri.
And at the same time, one of the larger benefits of Sec-54 is that one can hold a number of properties as on the date of transfer and still claim exemption on the gains.

Sunil Kulkarni, Pune

9th May 2016

If property is register in your name then you can sale it to anybody. But before that you have to submit any outstanding LPT Returns, clear all your outstanding tax, interest and penalties, including Household Charge arrears, Make sure that you were entitled to any exemption you claimed. If required, you should self-correct any return where you under-declared the value or claimed an exemption that you were not entitled to and Consider whether the valuation band or valuation you declared at 1 May 2013 was reasonable and honest. Yes, you can exemption on property which is in your and your wife's name.

Gauri Shinde, Pune

9th May 2016

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