Tax implication on receiving gifts from father.

V Manu 1
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Hello -

I bought a residential apartment. Took loan from a PSB in Jan '13. Took possession of apartment in early April '14. My father has a piece of land (registered in his name), which he wants to gift to me. He had bought that in Jan 11. I wish to sell the piece of land and use the money to prepay my home loan.

Following options I am aware of - 1) My father sells the piece of land, pays LTCG tax and then transfer all the money to me through a bank account and declare it as a GIFT to me. Which I will partially use to prepay my home loan and keep it. 2) My father first transfers the piece of land in my name by way of registration (We bear registration cost) and then I sell it and use the money to prepay my home loan.

Questions: 1) I have come to conclusion that cost in the option ONE is lesser. However, I wish to seek your expert opinion. 2) If we go by option 1, Would there be a limit on amount of money? 3) If we go by option 1, Would there be a tax implication on my end? 4) Do you suggest any other way to make this happen?

Thanking in anticipation!

Regards,

gift-from-father section-54f gift-to-relatives home-loan income-tax
2 Answers

As per current tax laws, if an individual receives cash or non-cash gifts from persons other than blood relatives* in excess of Rs 50,000 in a year, the whole of such gift received will be treated as the individual's income and must be included under 'Income from other sources'. If it does not exceed Rs 50,000, it will not be treated as income.

But not all gifts are taxed. The specific assets for which gift tax is applicable are - cash, immovable property such as land & buildings, and movable property - shares & other securities (debt, derivative F&O), jewellery and bullion, art and antics (paintings, sculptures, etc.).

In the same way, gifts from the following sources are tax exempt irrespective of amount received as Gift: • Any blood/close relative*Gifts received on your wedding • Gifts received by Inheritance or by Will • Gifts received from any local authority (state government and related establishments) • From any university, educational institutions, charitable institutions and other institutions referred under section 10 (23).

Yash M Jhaveri61
  1. If income tax on gains is less than gift deed expenses, I would suggest you to go with that only.
  2. There is no amount of limit on gift a father can give to his son.
  3. There won't be any income tax payable on gift amount received by son from his father.
  4. Best option would have been to make your father as joint owner in new property. But as its registration would already have been done, it may not be possible now. In some cases, father has bought residential property in name of son from gains and still availed tax benefits u/s 54F. Some of such cases have been fought in court when IT dept objected to this and some have been won too.
Pankaj Batra5212

Thanks Pankaj!

When you mention "Gift deed expenses", what are you referring to? My understanding is; If we follow option #1, the only expense we will end up bearing is LTCG tax (My father is senior citizen + Indexation is benefiting too).

V Manu•

Gift deed expenses are applicable only in option 2. Its registration and stamp duty cost of property transfer.

Pankaj Batra•
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