How will I be taxed on sale of a joint property?

My two daughters collectively bought a residential plot in August 2007 inside a longtime housing complicated in Rajasthan. I entered into an settlement with my daughters in July 2012 and took the rights of setting up a residential home in that plot at my very own bills. It was additionally agreed that I might earn any rental revenue and pay taxes as relevant. The development was accomplished in July 2013 and the constructing was rented out that very month, with a lease settlement duly executed with  the tenant.

I gifted the residential constructed property in August 2021 to my daughters by means of a suitably worded reward deed, duly notarized. 

The sale deed was executed and registered with the native authority, sub-registrar Neemrana, in September 2022. However, I shall proceed to earn rental revenue until the sale of the whole property, as per the July 2012 joint settlement. 

My daughters have now proposed to promote the property earlier than 31 March  2023. How will LTCG on  the plot from its date of buy, i.e August 2007, and LTCG of the residential home constructed later, i.e. July 2013, be computed when the overall property is bought?

Will LTCG and tax advantages U/S 54EC be equally cut up among the many joint homeowners after taking into account the stamp obligation, brokerage and different associated bills together with the foremost development value of the residential home?

Name withheld on request

Since, the phrases of the settlement or the reward deed usually are not accessible, it isn’t clear whether or not you had the possession title of the residential home constructed by you or solely the rights to make use of/ set free the residential home, which was subsequently gifted by you in equal proportion to the daughters in August 2021. 

Since the property (plot of land and the constructed residential home) was held for a interval of greater than 24 months previous to sale, the whole property will qualify as long-term capital asset (LTCA) and the revenue arising from its sale shall be thought of as long-term capital achieve (LTCG).

The value of such property within the palms of your daughters shall be the price of the plot as elevated by the price of development incurred by you and the stamp obligation, and brokerage expenses incurred for registration of the property. Also, whereas computing the LTCG, your daughters are eligible for the advantage of indexation in respect of the price of the property (whereby the price of plot shall be listed from 2007 whereas the price of development / different expenses shall arguably be listed for the respective 12 months of cost).

Also, LTCG shall be cut up among the many daughters within the proportion of investments made by them on the time of buy. 

Further, the accessible deductions as relevant (together with underneath part 54EC), shall be accessible to each the daughters in proportion of specified investments made by them individually towards their respective share of LTCG revenue.

Parizad Sirwalla is companion and head, international mobility providers, tax, KPMG in India.

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