Kindly let me the tax position

Mr. A (Father in law ) gifted a Household property to his daughter in law (B) in 30.6.2006.  Stamp duty  value at that time is Rs. 400000/- B paid the stamp duty on Rs. 400000/-  and gift deed was registered in her name.

Now in 30.6.2014 She(B) sold the property for Rs. 65 Lacs and on 30.9.2014 she (B) purchased a new house  for Rs. 80 lacs.

Kindly let me know the tax position

Dear Sanjay,

Below is our reply in your case.

1) Gift of Household Property made by A to B in 2006 was exempt from income tax in the light of section 56(2). Therefore No tax would have been paid by B in the financial year 2006-07. (No Tax implication on this trasanction).

2) On 30.09.2014 B sold this property for Rs.65 Lacs. This trasanction is covered u/s 45(1) under the head  capital gains. On this sale B is liable to pay income tax on capital gains.

Capital Gains shall be computed as follows:
Capital Gains = Rs.65 Lacs - (Cost of acquisition of property by A / Cost inflation index of the year in which A purchased this house X Cost inflation index of year of sale by B)

3) However, since B has purchased the new house within the time specified in the law, therefore her whole capital gain (as calculated above) would be exempt from income tax. Therfore B is not liable to pay any income tax now. However all the details shall be shown in her income tax return so that AO can process and verify the details.

If you have any question, Pl post the same.

Kind Regards
TaxReply.com
 

As the gift was made to a daughter in law the capital gains will be clubbed under section 64(vi) in the hands of Father in Law and investment in property should be in the name of Father in Law to claim the benefit of section 54F.

Dear Mr. Kumar,

Thank you very much for adding the important point, which we missed to mention.

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Dear Sanjay,

If the relation of Father-in-law and Daughter-in-law exists both at the time of gift and sale as well, then section 64(vi) comes into play and the entire capital gain shall be cluubed in the hands of Father-in-law.

If you have any questions, Pl post the same.

Kind Regards
TaxReply.com