Income tax rule on sale of home property acquired as alimony by a divorcee

What is tax implication on sale of residential home property acquired as alimony for a divorcee? Can she save tax by reinvesting the cash?

Answer: The complete sale consideration acquired on sale of property acquired as alimony on divorce isn’t handled as taxable revenue. What is taxable is the capital positive factors made on sale of such property. For the aim of computing the capital positive factors within the circumstances the place the vendor himself or herself has not paid for it like in case of presents, inheritances, the quantity paid by the earlier proprietor or house owners is to be taken as the associated fee.

Whether such asset is to be handled as quick time period or long run is determined by the mixed holding interval ranging from the date it was purchased for a consideration. In case the mixed holding interval is 24 months or extra the income are taxed as long run capital positive factors. It could also be famous that in such circumstances although the associated fee and holding interval of the earlier proprietor is to be considered, you aren’t allowed to take the advantage of indexation from the date of buy by the unique purchaser if one goes strictly by the language used within the regulation and is accessible from the date on which the donee will get to personal such asset. However, a number of of excessive courts have held that the advantage of indexation is accessible from the date it was acquired for consideration.

You can declare revenue tax exemption beneath Section 54 on sale of the flat acquired as alimony if you happen to make investments the listed capital positive factors for buy or development of one other residential home property inside specified interval. Additionally and alternatively, you possibly can make investments the capital positive factors in capital positive factors bonds of specified monetary establishments inside three years from date of sale of the residential property as much as ₹50 lakhs in a 12 months.

(Balwant Jain is a tax and funding skilled and could be reached on jainbalwant@gmail.com and @jainbalwant on his twitter deal with)

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Updated: 12 Jun 2023, 03:26 PM IST

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