I am 68year old Pensioner. Last month I sold my house property and earned around Rs50lacs. I w am planning to gift the entire amount to my son in order to get tax exemption. My son is planning to utilise the amount to repay part of his housing loan from HDFC, probably during September 2025 . Now (1)Does he has to pay IT for this amount as he will be spending only in laterhalf of 2025? (2) Instead, if I invest this amount in LTCG or NHAI funds, do I have to pay any tax for this total amount this year?

Ans: Tax on capital gain arises on transfer of house property will be applicable as per the prescribed conditions and required to be shown in Income tax return. However, amount transferred to son as gift is not an income. Thus, not liable to tax.

Ans: Your Mother may have to pay short term or long term capital gain tax on the land sale transaction.

The tax will depend on period for which land property was held in her name and cost of (indexed cost if long term)acquisition.

Mother giving cash gift to her son is not taxed but the income you may derive from this lumpsum cash gift is taxable.

For working out detailed modalities of this tax liability please consult a CA/tax advisor.

Ans: The refund you receive is considered a capital transaction. Whether it is taxable depends on specific factors. Below is a detailed analysis:

1. Taxability of Refund Received
Principal Amount Paid:
The principal amount refunded is not taxable. This is because it is your own money returned.

Interest Paid by the Builder:
Any interest or additional amount refunded is taxable. It will be considered "Income from Other Sources."

Loan EMIs Paid:
Refund of EMIs made towards loan repayment may include interest and principal components. The interest portion refunded could be taxable as per tax rules.

Cost Indexation Benefit:
Since you booked the property for investment, any capital gain or loss may apply. This depends on how the tax department views the refund transaction.

2. Possibility of Transferring the Amount to Your Spouse
Gifting to Spouse:
You can transfer the amount to your spouse without immediate tax implications. Gifts to a spouse are exempt under the Income Tax Act.

Clubbed Income Rule:
However, if your spouse invests this amount and earns income, it will be clubbed with your taxable income. You will have to pay tax on the income generated from such investments.

Using a Joint Account:
Alternatively, consider using a joint account for better transparency and tracking of funds.

Steps for Managing Tax Liability
Evaluate Refund Break-Up
Ask the builder for a detailed breakup of the refund amount.
This should include the principal amount, interest, and EMI refund details.
Tax on Interest Component
The interest portion will be taxed under "Income from Other Sources."
Include this amount while filing your income tax return (ITR).
Utilise Capital Gains Exemptions (If Applicable)
If the refund amount results in capital gains, you can reinvest in certain tax-saving bonds under Section 54EC.
Alternatively, reinvesting in another residential property could provide tax exemption under Section 54F.
Keep Documentation Ready
Maintain all records of payments made to the builder and the refund received.
This will be helpful in case of any scrutiny or queries from the Income Tax Department.
Recommendations for the Refund Amount
Do Not Invest Entirely in Fixed Deposits
Fixed deposits offer low returns, which may not beat inflation in the long term.
Consider growth-oriented investments like mutual funds for better returns.
Explore Mutual Funds for Better Returns
Invest part of the amount in diversified mutual funds for wealth creation.
Actively managed funds outperform passive options over the long term.
Consult a Certified Financial Planner to align investments with your goals.
Maintain Liquidity for Immediate Needs
Keep a portion of the refund in a liquid or short-term debt fund.
This ensures funds are readily available for short-term needs.
Final Insights
The principal portion of the refund is not taxable.
Interest and EMI refunds may attract tax under specific conditions.
Transferring the amount to your spouse is possible but involves clubbing rules.
Diversify investments into mutual funds for long-term benefits.
Maintain proper documentation to handle tax implications smoothly.
Seek personalised guidance from a Certified Financial Planner to optimise the utilisation of this refund.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Hello;

Definitely the part of amount should be utilised to fulfill her home loan.

However for tax liabilities and avenues to save them, if possible, should be discussed with a CA/tax advisor.

Best wishes;