Commercial Property sale and tax

Dear Sir,

My father has one commercial property which he bought in 1998 @ Rs 1.49 Lacs under his name only. Now we want to sale this commercial property @ Rs. 40 Lacs. There is one house under my father name (single owner) and one flat under name of myself, my father & my mother. We want to buy one more underconstruction flat under name of myself, my wife and my father investing the money from commercial property. 1. Can you please guide me about the tax implication on selling this commercial property and buying one residential property? 2. Can my father invest the whole amount coming after selling the commercial property in buying one flat as mentioned above? 3. Can my father gift the money from commercial property to me and we can invest it in buying abovesaid flat?

Please support. Thanks

asked Apr 11 '13 at 17:23 by GGN_Prop 112

If your father already owns more than one residential house properties in his name (single or jointly owned) at the time of sale of commercial property, he would not be able to claim tax benefits by buying another residential house property u/s 54F.

He can only save tax fully by investing whole sale consideration amount into capital gain bonds u/s 54EC.

Tax cannot be saved by gifting amount to anybody else. He can gift commercial property to you first and you can sell it and claim tax benefits by buying new property u/s 54F.

answered Apr 11 '13 at 18:54 by Pankaj Batra 5.2k320

Dear Sir, Thanks for your reply. But I am still confused. Please guide what should we do to save capital gain tax? We have already booked a underconstuction new residential flat and needs to pay for it. This flat is under name of myself and my wife. I asked the builder if we can enter one more name in the deed, he said it is ok to add one more in the names but maximum up to three only. Please suggest what we should do? Thanks again
(Apr 11 '13 at 20:08) GGN_Prop
As your father already owns two residential house properties, he can only save income tax by investing into capital gains bonds u/s 54EC. Or he can gift/transfer property to you before sale. Then you can sell property and save tax against new flat purchase. But in this case as well you should not be owning (only properties for which possession has been taken) more than one residential house property at the time of sale.
(Apr 11 '13 at 20:11) Pankaj Batra
Sir, is it possible if he can gift it to my wife and then my wife can sell it and can invest all money in new flat? If yes then what would be the procedure for it and will it be taxable to anyone. Thanks
(Apr 11 '13 at 22:20) GGN_Prop
Yes, its possible. Get gift deed or family settlement deed created for this property transfer. You may have to pay stamp duty for this transfer. Please consult a local lawyer dealing in property matters.
(Apr 11 '13 at 22:55) Pankaj Batra
Thanks a lot Sir... I will contact some local lawyer and will contact you in case of any further concern. Hope this will be Ok.
(Apr 12 '13 at 09:35) GGN_Prop
Dear Pankaj Sir, I have some more concerns. The commercial property which my father brought in 1998 is not registered yet. It is being sold by Red Cross society to my someone and then to my father. My father has proper letter of allotment or transfer letter. 1. Please suggest should we register the property first and then transfer to my wife or how? 2. In relation to long term capital gain, capital gain will be calculated from date of possession/letter of allotment (in year 1998) or date of registration (in case we get it registered now)? 3. Can my wife sell it after getting it as a gift from my father without any tax implications like short term or long term capital gain or tax will be there? also do we need to add my father in new property/flat names?
(Apr 12 '13 at 14:28) GGN_Prop
There should not be any need first to register. Your father can get it transferred on your wife's name. Date of possession generally is accepted for long term gains computation. If your father gifts property to your wife, original date of possession by your father would be considered and hence your wife won't have short term gains from it. As old property would be in wife's name, gains would be hers only and so there is no need for your father to buy anything or get his name added to any flat/property.
(Apr 12 '13 at 17:46) Pankaj Batra
Dear Pankaj Sir, I have consulted one local lawyer in this case, but still has few points after having discussions with him, which I am mentioning below in two comments for your opinion, please help. In case of gift deed, stamp duty and registration value will be counted on present value not the value of allotment (which was 1.5 Lacs approx in 1998). Please suggest. He is saying you can have Degree signed rather than Gift deed, in which my wife will claim for the property and will get it? My question is : Can in this case my wife will get 100% of share or less than that? and is it good option than having gift deed?
(Apr 13 '13 at 17:35) GGN_Prop
If we go for gift deed to my wife and my wife sell it then income generated from it would be counted in my fathers income tax. For Eg. If my wife sells it for rs 25 Lacs then all income (25-1.5L = 23.5 L) will be added to my father's income. Will it hold true in case my wife invests all the money (23.5L) into new property (not having my father's name in property). Can we have partial withdraw facility in Capital gain account as my new flat is in construction phase and payment is on construction link plan. My new flat Possession will be in May 2016. When should be sale the commercial property to save capital gain tax? Thank you very much for your all support and help!!!
(Apr 13 '13 at 17:35) GGN_Prop
Yes, stamp duty for gift deed would be applicable on current market circle rates only. I am not sure about degree. Frankly never heard this term before. Once gift deed or family settlement is done, I think, income would be taxable for wife and not to the father. Yes, amount can be withdrawn partially multiple times from capital gain account. Sale of commercial property should only be done after May 2014 in order to get benefit against new flat.
(Apr 13 '13 at 17:41) Pankaj Batra
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Asked: Apr 11 '13 at 17:23

Seen: 3,143 times

Last updated: Apr 13 '13 at 17:41