Have an actual property reward? Consider tax guidelines

Have a real estate gift? Factor in tax rules

Actual property occupies a considerable share of a person’s asset base and it’s not unusual for possession of actual property (known as property) to cross on to relations by the use of a present or beneath a will.

A present in frequent parlance means one thing given voluntarily with out cost in return (i.e. for ‘Nil’ consideration), whereas the which means as per the Switch of Property Act, 1882 is switch of sure current moveable or immoveable property made voluntarily and with out consideration, by one particular person to a different. Typically, a present of property is documented in writing by a present deed.

On this article, revenue tax implications on reward of property (held as an funding i.e. a “capital asset”) have been outlined. A present is usually understood as a switch of an asset from one particular person to a different. Nonetheless, ‘reward’ is a disregarded ‘switch’ for the needs of computing revenue beneath the top ‘capital features’. In different phrases, there shouldn’t be any revenue tax payable or loss allowable for the donor on account of the reward transaction. That is on the presumption that the genuineness of the reward transaction just isn’t beneath query.

Now, coming to the revenue tax implications for the recipient on account of the reward transaction. In circumstances the place a person taxpayer receives an immovable property with out consideration from one other particular person, then revenue tax implications must be evaluated within the fingers of such recipient, being a person. On this connection, following is the taxability mechanism within the fingers of the recipient, being a person:

# Immovable property acquired “with out consideration”: If the stamp obligation worth exceeds Rs 50,000, the stamp obligation worth of such property can be taxable as revenue.

The above facet is defined by the use of an illustration.

The revenue on account of the reward transaction (as outlined above) is taxable within the fingers of the recipient, being a person beneath the top ‘revenue from different sources’ and taxable at regular tax charges (as per relevant revenue slabs). Following are the exceptions in respect of taxability of reward transactions:

# Reward acquired from relations (refer chart beneath for definition of relations) or
# Reward acquired on the event of the marriage of the recipient or
# Reward acquired in contemplation of dying of the donor.

In case of the above exceptions, revenue just isn’t thought-about taxable within the fingers of the recipient, being a person and that is defined beneath by the use of an illustration.

The next further points are of relevance in case of reward transactions and needs to be famous:

# In circumstances the place actual property turn out to be the property of the taxpayer on account of receipt of reward and that switch is disregarded for the needs of computing ‘capital features’, the price of such actual property for the donor can be thought-about as the price of acquisition within the fingers of the recipient of such reward. That is defined beneath by the use of an illustration and descriptions a case through which reward transaction was thought-about not taxable within the fingers of the recipient.

# In circumstances the place the worth of the true property (i.e. stamp obligation worth) is taxed within the fingers of the recipient, the quantity taxed can be thought to be price of acquisition for such recipient. That is defined beneath by the use of an illustration and descriptions a case through which reward transaction was thought-about taxable within the fingers of the recipient.

The above points can be related when the gifted property is offered by the recipient (i.e. particular person receiving the reward).Along with revenue tax, one wants to contemplate different implications comparable to authorized, stamp obligation (based mostly on respective state laws) in respect of property reward transactions. Provided that property transactions are excessive worth and complicated on account of assorted components, it’s advisable for the taxpayer to hunt skilled steerage from revenue tax consultants whereas getting into into such transactions.

The writer is director, Deloitte Haskins & Sells LLP



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