Inherited Property Dispute: Taxes and Rights

Ans: Hello, yes the liability of tax can be shared by both. If the income is coming in your account, you can pay the entire amount of tax and then split the remaining with your brother.

Ans: The Long-Term Capital Gain (LTCG) tax liability on the sale of the property will depend on various factors, including the purchase price, sale price, and holding period. Here's how it's calculated:

Determine Cost of Acquisition: The cost of acquisition for your husband's share would be his portion of the original investment, i.e., Rs. 4 lakhs.

Calculate Indexed Cost of Acquisition: Adjust the cost of acquisition for inflation using the Cost Inflation Index (CII) for the relevant financial years. This indexed cost will be used to calculate the LTCG.

Deduct Indexed Cost from Sale Price: Subtract the indexed cost of acquisition from the sale price to determine the LTCG.

Apply LTCG Tax Rate: As per current tax laws, LTCG on the sale of immovable property is taxed at 20% with indexation.

Compute Tax Liability: Calculate the tax payable on the LTCG at the applicable rate of 20%.

Transfer of Share as Gift:

Your husband's brother can transfer your husband's share of the sale proceeds as a gift within the blood relation. However, it's essential to consider the tax implications of such a transfer:

Gift Tax Liability: Gifts received from relatives are generally exempt from tax under the Income Tax Act. Therefore, your husband should not incur any gift tax liability on receiving his share of the sale proceeds from his brother.

Documentation: Ensure proper documentation for the gift transaction, including a gift deed or a written agreement, to establish the transfer of ownership legally.

Avoiding Tax Evasion: While gifting within blood relations is permissible, it's crucial to ensure compliance with tax laws and avoid any suspicion of tax evasion. Proper documentation and transparency are essential to demonstrate the legitimate nature of the transaction.

Consultation with Tax Advisor:

Given the complexity of tax implications and legal requirements, it's advisable to consult with a tax advisor or chartered accountant who can provide personalized guidance based on your specific circumstances and ensure compliance with tax laws.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Considering it was registered in the name of your brother in law, practically a buyer would pay the entire sum to him unless you can prove that the property belonged to both the brothers equally. Even in the eyes of law, brother in law will have to pay capital gains alone. For capital tax exemption, the proceeds will need to reinvested in residential property or NHAI/ REC bonds.

Gift prior to sale will help but there would be nominal stamp duty cost (no income tax issue). Once property is equally owned and registered in the records then respectively portion can be sold by each of the brothers and accounted accordingly.

Please take your CA advice as well on this before moving ahead.

Ans: Each of the beneficiaries shall file ITR separately and pay tax under the head Long Term Capital Gains. Since the plot is sold in June 2024, it shall be reported in ITR of A/Y 2025-26. Rate of LTCG Tax will be 12.50% (on gain only). Cost of plot as mentioned remains Rs.2,00,000.00, however please add Cost of Construction (which is not mentioned in the question) of house in the cost.
All the three are eligible for relief either by investing in house property or purchasing Capital Gains Bonds of NHAI or REC etc.
Most welcome for any further clarification. Thanks.