Reward of immovable property, even from a relative, could have stamp obligation implications

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My mom purchased a plot in Bangalore in 1995. We are attempting to promote the land for Rs30 lakh now. My mom is about 60 years previous. The customer will switch the funds via RTGS to our checking account. Do we have to pay revenue tax if my mom divides the property into three equal elements: between herself, me and my sister? Additionally please advise how we are able to cut back the tax outgo on this transaction. 

—Deepu

Your mom intends to present part of the property to you and your sister previous to the proposed sale. 

Usually, the place an immovable property is obtained by a person throughout a monetary 12 months (FY) with out consideration and the stamp obligation worth of such property exceeds Rs50,000, the recipient would wish to declare the worth of the property obtained as “revenue from different sources” and pay revenue tax on it. Nevertheless, items obtained from a relative (together with mom) wouldn’t be equally taxed. 

Subsequently, such a present of property wouldn’t be taxable as revenue in your or your sibling’s palms. It might be advisable to your mom to doc the present in a authorized present deed and place it in her information. Nevertheless, present of an immovable property could have stamp obligation implications that, which should be evaluated.

Subsequent sale of the property by your loved ones will then end in tax implications for every of you (your mom, you and your sibling) within the ratio of your possession. 

As your mom has held this property since 1995, the a part of the property obtained by you as a present from her may even be deemed to be held by you and your siblings since 1995. The acquire or loss, from the sale to every of you, would then be taxable as long-term capital acquire (LTCG) or loss (LTCL). 

LTCG is computed because the distinction between internet sale proceeds and the listed value of acquisition of the land. Indexation refers to adjusting the price of the asset based mostly on the associated fee inflation index (CII) revealed by the income-tax workplace. The LTCG arising from the sale of an asset on or after 1 April 2017, needs to be computed close to the indexation of prices between 1 April 2001 and the 12 months of sale.

Since this property was first bought in 1995 by your mom, every of you could choose to make use of the truthful market worth (FMV) of the property as on 1 April 2001 as the price of the property, to compute the taxable capital features. It is best to subsequently get hold of a valuation of this asset as on 1 April 2001 and use both such FMV as on 1 April 2001 or the precise buy value, at your discretion. 

The LTCG could be claimed as exempt from tax by reinvesting it in a brand new residential property in India or in specified bonds . The steadiness LTCG, if any, shall be taxable at 20.6% (together with training cess). Proportionate share of LTCG can be taxable within the palms of your mom, sister and your self in ratio of possession submit gifting by your mom.

In case your mom first sells the property, then the whole LTCG can be taxable in her palms. Subsequent gifting of funds out of your mom to you and your siblings wouldn’t have any tax implications for you, your sibling and your mom.

The EMI for my under-construction home began from 1 April 2017, however possession is due in September 2018. Can I declare exemption for my house mortgage for FY 17-18?

—Snehalata Deshmukh

The tax deductions permitted in respect of both compensation of principal or curiosity in respect of a house mortgage could be availed starting from the FY by which the home acquired is totally constructed. 

Any curiosity paid previous to the FY by which building or acquisition is accomplished, could be claimed in 5 equal instalments, commencing from the FY by which the property is totally constructed.

Subsequently, curiosity paid by you until 31 March 2018 could be claimed in 5 equal instalments ranging from FY2018-19 (assuming building is accomplished and possession handed over in FY2018-19). This deduction is along with the curiosity payable for every such FY starting FY2018-19. The full deduction for curiosity can be topic to the extra caps relying on whether or not the property is self-occupied or let-out for lease, in every FY.

Parizad Sirwalla is associate (tax), KPMG.

Queries and views at mintmoney@livemint.com

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