Hi Sreekanth,
I apologise for the long question in the first case. I am currently residing in Hyderabad. My father passed away in the year 2002 and he had a property on his name during that time. Since,he didn't leave any will prior to his demise by that virtue myself,my brother and mother have become legal heirs of the above said property. Recently we have sold this property and the share has been divided into three equal parts. I am looking to invest the amount from house proceedings in buying a flat in hyderabad to get exemption for Capital Gains. Since my mother is also working ,she also wants to invest half of her share in the property which I am looking to buy and other half into the property which my brother intends to buy. Below are the queries that I have
1.Can she invest equal half of her share in the property that I and my brother intend to buy?
2.How can she claim exemption from capital gains tax? Should she be made co-owner in the sale deed
3. In the above case, I am looking to go for loan for 40% of the amount and would like to pay the EMI by myself only since my mother is due to retire in 12-16 months.I don't want any liabilities on my mothers end.
4.If she is made the co-owner will the bank be providing me the loan alone on my name without including her name?
5. What is the way to transfer her share of ownership to me and after what duration can my mother do that?
6.What is the legal process for that and what would be the expenses incurred if any (eg:registration,stamp duty)
Also,Please suggest if there is any other way legally to claim exemption from Capital gains? Also,few banks were saying that if my mother is made a co-owner for the property then my brother by virtue of being legal heir would be eligible for that. How do i overcome this? Do i need to get an NOC from my brother as he is ready to give the same.
Also please suggest if you have any other solutions for the above problem
Thanks,
Bhargav
1 Answers
Dear Bhargav,
I am assuming this as a 'house (residential) property'.
1 - Two points here ;
a) Exemption U/s 54 cannot be denied for investments made in joint names. So, the long term capital gains on sale of property can be reinvested in a new residential property in joint-names.
b) However, you are allowed to purchase or construct only one new asset from the capital gain that accrues. This means that you cannot make multiple property acquisitions and thus seek to reduce your tax outgo. However, if you sell more than one property, you can invest the resulting cumulative capital gain amount in a single new property.
I believe that she can’t buy multiple houses to save tax. Irrespective of the amount of capital gain, it has to be reinvested in a single housing unit.
So, your mother can re-invest the proceeds only in one house.
Kindly read :
https://www.relakhs.com/how-to-save-capital-gains-tax-on-sale-of-land-house-property/
https://www.relakhs.com/long-term-capital-gain-exemptions-court-orders/
2 - Yes, she can be the co-owner of either of the new properties. In case, she invests only a part of her share in the new property, the remaining portion of LTCG is subject to taxes.
4 - If she is made as a co-owner, banks may insist on including her as co-borrower. However, you can request your banker to deducts the 100% EMIs from your banking account and you will can claim 100% of EMIs as tax deductions.
5 & 6- She can Gift her share in the new property to you anytime after the acquisition, but need to inform your lender/banker on this, if loan is in joint names.
Kindly read :
https://www.relakhs.com/real-estate-property-transfer-deed-types/
https://www.relakhs.com/gift-income-tax-rules-detailed-guide/
https://www.relakhs.com/sale-gifted-property-capital-gains/
If you have your own family, they will be considered as legal heirs for your newly acquired property. You can write a WILL accordingly and keep it.
https://www.relakhs.com/nominee-legal-heir-will-importance/
https://www.relakhs.com/last-will-testament-benefits/
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