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Anil

Anil Rego  |340 Answers  |Ask -

Financial Planner - Answered on Jan 10, 2022

Anil Rego is the founder of Right Horizons, a financial and wealth management firm. He has 20 years of experience in the field of personal finance.
He’s an expert in income tax and wealth management.
He has completed his CFA/MBA from the ICFAI Business School.... more
Ashish Question by Ashish on Jan 10, 2022Hindi
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It is always a pleasure to read your articles and answers.

For the first time I have had a query of my own.

My dad and his son-in-law (my brother-in-law) are buying a property worth Rs 3 crores in Gurugram.

The actual payments have been done equally by both of them.

We were advised by our broker that if my mother's name is included in the sale deed, the stamp duty amount will come down to 5% for  1/3rd of the property value (Rs 1 crore) and 7% on the balance 2/3rd (Rs 2 crores). Otherwise, it will be 7% on the entire Rs 3 crores.

Under the circumstances, should my mother too contribute her part of the 1% of the TDS amount that is to be deducted and the 26QB form details subsequently reflected in the sale deed?

If the answer to the above is yes then I have a follow-up the query, with your permission.

For saving on capital gains for my dad, he has to show an investment of Rs 1.2 crores as his share of investment.

Therefore the CA is insisting that out of the Rs 3 lakhs TDS to be deducted, it should be in the ratio of Rs 1.2 lakhs, Rs 30,000 and Rs 1.5 lakhs between my dad, mom and brother-in-law respectively, basically to reflect the overall shareholding of the property.

Now the question is:

a. Is this correct because another CA said it doesn't matter as she has not financially contributed and is a spouse.

As per him, the TDS can just be split 50-50 between my dad and BIL.

b. If it is not so, that is they pay TDS as per their share 1.2:0.3:1.5, how will that impact the stamp duty, which was the reason why we were getting my mother's name in the first place.

Will it be at 5% on one-third and 7% on the balance, basis it's a lady and two gentlemen, or will that benefit of 5% be restricted to her share of Rs 30 lakhs out of Rs 3 crores which is 5% benefit on 10%?

Ans: To answer the first part of your question, your mother can contribute or your sister can make a gift to your mother and her contribution could be through the same.

It is a good idea to have her portion bequeathed to you in a will, if there are any other successors apart from the two of you so that it does not create an issue for you in the future.

As for your follow-up questions:

a. Your dad needs to make the investment of Rs 1.2 crores to save his capital gains on reinvestment.

As for the balance amount, you can decide the split.

If you are only showing Rs 0.3 crores in your mom's name, you will save registration cost only on this amount.

This is something that you need to keep in mind. 

b. You need to pay TDS in the same ratio as your holding.

Your dilemma of having a lower tax saving in your mother's name is what I have also pointed out in point a, above.

One has the option of your brother-in-law gifting Rs 0.7 cr to your mother through your sister (his wife) for her to contribute Rs 1 crore.

Subsequently, after some time, your mother could gift her share to your father and sister and she can take an exit.

However, I am not sure it is worth taking the effort of doing all of this to save Rs 2 lakh on a property worth Rs 3 crores.

There would be some cost of gifting and registration of the gift which will further reduce the benefit.

You need to take a decision of how you would like to go about it.

I would expect that your father would anyway be saving more than 2% in his capital gains tax arising out of his earlier property sale by reinvesting the proceeds into the current property under consideration. 

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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