Earnings tax must be paid on long-term capital positive factors arising from sale of gifted land

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My grandfather, who’s 75 years previous, is planning to promote land price round 10 lakh and provides that cash to me. I’m planning to purchase a brand new home in the identical monetary 12 months. I need to understand how we will keep away from paying long-term capital positive factors (LTCG) tax. Will he want be to be a co-applicant or co-owner of the property? He may also present the land to me and I can promote it to the client, or he can promote the land and present your entire quantity to me.


It’s assumed that the plot of land being bought doesn’t qualify as an agricultural land as outlined below the Earnings-tax Act and, therefore, the sale of the identical triggers a taxable occasion. Additionally, it’s assumed that the plot of land is just not residential in nature and has been held by your grandfather for greater than 24 months. Accordingly, the positive factors arising from the switch of the identical shall be LTCG. You may have two choices.

Possibility 1: Your grandfather sells the land, items you the cash and you purchase a home along with your grandfather as a co-owner.

LTCG (computed as per the prescribed guidelines) on sale of such land might be taxable within the palms of your grandfather. A roll-over exemption towards such LTCG could also be obtainable to your grandfather in direction of the next investments, topic to the prescribed situations: Below Part 54EC, by investing LTCG in specified notified bonds; below Part 54F, by investing the online consideration in a brand new residential home in India.

Nonetheless, to avail the exemption, the above investments would should be performed by your grandfather straight. In case your grandfather items your entire sale proceeds to you, the above situations usually are not fulfilled and the exemption wouldn’t be obtainable.

The gifting of money by your grandfather to you, being kinfolk, wouldn’t set off any separate tax implications for both of you.

Possibility 2: Your grandfather items the land to you, and also you promote the property and purchase a home in your identify.

The gifting of land between your grandfather and also you, being kinfolk, wouldn’t set off any tax implications.

The following sale shall set off capital positive factors in your palms. Because the cumulative holding interval of the land exceeds 24 months, the land shall qualify as a long-term capital asset and the identical shall qualify as LTCG in your palms.

A roll-over exemption towards such LTCG could also be obtainable to you below Sections 54EC and 54F, topic to the prescribed situations and timelines talked about earlier. Therefore, in case you select to take a position the online consideration in a brand new residential home in your identify, you shall be eligible for LTCG exemption, topic to sure situations.

It might even be famous that, typically, present of an immovable property will be effected by a registered present deed and could also be responsible for cost of relevant stamp responsibility, relying upon the state during which the property is located. Additional, with respect to the present of land, it will likely be advisable that any such present be documented in a authorized doc through a present deed and positioned on the data.

Parizad Sirwalla is companion and head, international mobility providers, tax, KPMG in India. Queries and views at mintmoney@livemint.com

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