capital gain advice and investment in joint property with son in law

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My parents who are old and retired have now sold their only property (Independent house) and wish to invest this money to purchase a property jointly with my husband (their son in law) as they wish to stay with us now. The property is 20 yrs old and has been sold for 80 lakhs( 27lacs registered value + balance in 2 cheques towards furnishing and goodwill). Pls advise if this kind of investment is possible and the CG implication keeping in mind my father is retired with no income at all.

1 Answers

In case your father invest an amount more than gains received from old property sale, into new residential apartment, then there won't be any income tax payable u/s 54.

Below is the method for gain computation:
Purchase Year = A, Purchase Cost = P, Cost Inflation Index (CII) for purchase year = X
Sale Year = B, Selling price = Q, CII for sale year = Y
Indexed Purchase price = P x (Y/X) = R
Long term capital gain = Q - R = S

Sale year would be 2012-13 here in case its sold this year between 1st April 2012-31st March 2013. CII for 2012-13 is 852. Selling price as per registration document is 27 lacs.

If your father's contribution into new property purchase is more than this LTCG amount, then there won't be any income tax payable if possession of new property is taken before end of two years from sale of old property.

In case possession is not received before 31st July 2013, then LTCG amount would need to be invested into capital gain scheme account to claim tax deduction u/s 54.

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