Gifts from specified relations should not taxed

My spouse and I want to promote our residence in Chennai, which is value roughly ₹65 lakh. After the transaction, I want to present the sale proceeds in money to my two daughters. What are the earnings tax implications? If my daughters need to make investments the cash in fastened deposits, which earnings tax guidelines will apply?

—Name withheld on request

We have assumed that you simply and your spouse acquired the property after 1 April 2001 and the property has been held by you and your spouse for greater than 24 months. We have additionally assumed that your daughters are main (i.e. above 18 years of age).

The sale of property and the following present of sale proceeds to your daughters are two unbiased transactions from an earnings tax perspective.

Sale of residential propertyAs the residential home was held by you and your spouse for greater than 24 months, it shall be thought-about as a long-term capital asset and the good points arising out of the sale could be taxable as long-term capital good points (LTCG) in your arms.

Capital good points on the sale of a home will be computed because the distinction between web sale proceeds (sale proceeds minus brokerage bills) and the listed price of acquisition within the ratio of possession between you and your spouse.

The listed price of acquisition of the asset in your case could be calculated as the price of acquisition / price inflation index (CII) of 12 months of acquisition x the CII of 12 months of sale. (The CII prescribed for FY21 is 301). The CII for FY22 is but to be prescribed. The tax is payable at 20% (plus relevant surcharge and cess) on the ensuing LTCG. The LTCG will likely be calculated in your and your spouse’s arms within the ratio of your funding in direction of the acquisition of the property.

In the case of sale of a residential home, an exemption will be sought in any of the next methods, topic to the prescribed circumstances and timelines:

• Under Section 54 of the Income Tax Act, by investing your respective portion of LTCG in a brand new residential home situated in India.

• Under Section 54EC of the Act, by investing your respective portion of LTCG in specified bonds.

• Under Section 54GB of the Act, by investing your respective portion of web consideration in fairness shares of an eligible startup.

Gift to daughtersWhere a present of money is obtained by a daughter from a specified relative (i.e. father or mom), the transaction of present itself won’t give rise to any earnings tax implications within the arms of the donor (i.e. you and your spouse) or the receiver (i.e. your daughters). It could be advisable, nevertheless, for any such present to be documented and positioned within the data.

Further, in case your daughters make investments the money obtained as present in fastened deposits, they might want to supply the curiosity earnings thereon to tax, as relevant, of their respective tax returns.

Parizad Sirwalla is accomplice and head, world mobility companies, tax, KPMG in India.

Subscribe to Mint Newsletters * Enter a legitimate electronic mail * Thank you for subscribing to our e-newsletter.

Never miss a narrative! Stay linked and knowledgeable with Mint.
Download
our App Now!!