Q. I sold my flat in Delhi for Rs 58 lakh in August, 2024 and purchased a flat in Chandigarh for Rs 1 crore in April 2024. The funds over Rs 58 lakh were from my retirement benefits. My annual income for the past 3-4 years is between Rs 10 and Rs 10.50 lakh, comprising salary and interest on bank deposits only. TDS for the sale of Delhi flat was deducted by the buyer @ 1% and deposited in the income tax department’s account. I am told that this TDS is refundable to me if I purchase another property within one year. Kindly advise me how to get the credit for the tax deducted at source?
Gurpreet Singh, Mohali
A.It is presumed that the flat sold by you and the flat purchased by you are residential houses. This reply is based on the said presumption. The transaction of purchase and sale would be reflected in your tax return. The amount of sale consideration having been invested towards the purchase of a residential flat within a period of nine months, the provisions of Section 54 of the Income-Tax Act 1961 (The Act) would be applicable and long term capital gain on the sale of residential flat in Delhi would not be chargeable to tax. The amount of TDS deducted by the buyer would be adjustable against the tax payable by you in respect of your total income.
Gift tax liability
Q. My daughter shifted to the UK sometime back. She has a house in Hyderabad in joint name with her husband and has given it on rent. The rent is credited to the account of her husband every month. Can my daughter/ her husband gift this amount to her mother or not. If yes, then what would be the gift tax applicable. Also can this amount (gift money) be invested in FDR/SB account in her bank account (mother). If yes, then who will pay the tax on the invested amount?
Rajmohan Sharma, Panchkula
A. Your daughter can gift any amount to her mother. Your daughter’s husband can also gift any amount to his mother-in-law. There is no gift tax chargeable on such a transaction as Gift Tax Act 1958 is not in operation presently. The amount of interest earned by donee in such a case would be taxable in the hands of the donee.
Tax on forfeited earnest money
Q. I negotiated with a person for sale of a plot of land owned by me in Jalandhar for a sum of Rs 40,00,000. An Agreement to Sell was executed in April 2024. He paid me earnest money of Rs 50,000 and it was agreed that the transaction would be completed within two months i.e. by May 31, 2024. However, he failed to pay the agreed amount even by the end of June 2024. The amount of Rs 50,000 received as earnest money was forfeited in accordance with the terms specified in the Agreement to Sell. Will the amount so forfeited be taxable?
Sikander Sodhi, Moga
A. According to the provisions of Section 51 of the Income-tax Act 1961 (The Act) where any capital asset was on any previous occasion the subject of negotiation for transfer, any advance or other money received is retained by an assessee in respect of such negotiation, shall be deducted from the cost for which the asset was acquired or the fair market value, as the case may be in computing the cost of acquisition. Thus the amount of Rs 50,000 retained by you would be deducted from the cost of acquisition or fair market value as the case may be. The amount of Rs 50,000 would thus be indirectly taxable.
Tax on gifting property to brother
Q. I intend gifting a residential flat owned by me to my younger brother. The market value of the flat would be about Rs 1 crore. Will this involve any income tax or gift tax?
Arun Negi, Baddi
A.1 Gift tax is not payable in view of the Gift-tax Act 1958 not being in operation. However, this being a transfer of immovable property, would involve the payment of stamp duty and registration of Gift Deed in the office of the Sub-Registrar based in the city where the flat is situated. The stamp duty would be payable on the basis of stamp duty value of the property. The transaction would not involve income tax in view the provisions of Section 56 of the Income-tax Act 1961 (The Act). According to the said section, any immoveable property without consideration, the stamp duty value of which exceeds Rs 50,000 shall not be taxable in case the same is received from a ‘relative’. The term ‘relative’ has been defined in the section. The definition of the term ‘relative’ as applicable to an individual is as under
(i) In case of an individual -
(a) spouse of the individual;
(b) brother or sister of the individual
(c) brother or sister of the spouse of the individual;
(d) brother or sister of either of the parents of the individual;
(e) any lineal ascendant or descendant of the individual;
(f) any lineal ascendant or descendant of the spouse of the individual;
(g) spouse of the person referred to in terms (b) to (f); and
(ii) In case of a Hindu undivided family, any member thereof.
As would be observed from the above, ‘brother’ is covered in the term relative. Therefore, no income-tax would be leviable on such a transaction.
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