capital gain tax

Question

Dear Sir,

My father had purchased a plot in 1985, the cost of Rs.50,000/- in own name. He was expired in Dec'2004. My mother is alive ( approx.80 years above) living with me, not having PAN card & no tax payer. I have one brother. Now we want to sell this plot. One buyer is ready to purchase this plot in Rs. 20 Lacs. he arranged Rs. 5 Lacs & rest amount will be taking loan from Bank. My mother has given a affidavit that total amount may be divided in two part & to be paid to my sons. She is too old & could not be handle this amount. We will invest above amount in property / purchasing of flat. Now, Bank Manager informed that total amount we be pay through DD / Cheque to my mother only not to us.

If amount received by mother then can she distribute the amount to their son ? If no , how much capital gain tax will be applicable to my mother & how to avoid to pay capital gain tax.

How to convinces to Bank that the payment to be paid to me & my brother.

Kindly advice me on capital gain tax & reply above question.

Thanking you & Regards.

H.S.PANDEY

Pankaj Batra · Accepted Answer

In case your father had not left a will, then your mother is legal heir of property. If property is sold, only she can get the payment and will have to pay income tax on capital gain incurred on the transaction.

Bank manager is right in saying that money will only be given to your mother (owner of flat).

Computation of income tax on sale of plot:

Purchase Year = 1985-86, Purchase Cost = 50000, Cost Inflation Index (CII) for purchase year = 133
Sale Year = 2010-11, Selling price = 2000000, CII for sale year = 711

Indexed Purchase price = 50000 x (711/133) = 267293
Long term capital gain = 2000000 - 267293 = 1732707
Income tax on capital gain = 1732707 x 20% = 346541.4

After paying 3.46 lakh income tax, your mother can give remaining amount to you, which can be used by you for anything.

In order to avoid paying this amount, a new house has to be bought with the sale amount of plot, in name of your mother.

Other thing which can be done is first get the plot transferred on your name through family settlement deed and then you will be able to sell the plot and save income tax on capital gains by investing in a new flat in your name.

capital gain tax

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