My father has sold his two properties and wants to distribute its proceeds amongst hus three adult children that includes one married daughter. Ofcourse he can do that after paying his capital gains tax. My question is how this will be treated in the hands of children. Will they have to pay tax again?

Ans: Hello,

Your mother's intention to distribute her investments among her children is a thoughtful gesture. Here's a simple explanation of the process and its tax implications in India.

1. Gifting Process: Your mother can gift her shares and mutual funds to her children. This can be done through a gift deed or even a simple letter stating her intention to gift the shares. The letter should mention the details of the shares/mutual funds, the name of the recipient, and the relationship between the donor (your mother) and the donee (her children).

2. Tax Implications for the Donor (Your Mother): In India, any gift given by a parent to their child does not attract any tax, irrespective of the value. So, your mother will not have to pay any tax when she gifts these shares and mutual funds to her children.

3. Tax Implications for the Donee (Her Children): The children will not have to pay any tax upon receiving the gift. However, if they decide to sell these shares or mutual funds in the future, they will be liable to pay tax under the head 'Income from Capital Gains'. The tax rate will depend on whether it's a short-term or long-term capital gain.

4. Gift Deed: Although it's not mandatory, it's advisable to execute a gift deed for each child. This will serve as a legal document and can be useful in case of any disputes in the future.

I hope this helps!

Ans: Amount received from father is not an Income.

Ans: To save tax on capital gain, your parents need to invest gain amount in another property and it can not be shared with child.

Capital gain tax will change if Budget proposal are implemented as rate of tax is reduced from 20% to 12.5% and benefit of indexation will not be available.

Ans: 01. In this case all 3 of you (You, Your Mother & Sister) have to file ITR separately, showing the LTCG (Amount received from such sale - minus its Cost).
02. This LTCG can be reinvested either in House Property or Capital Gain Bonds, to save tax liability.
Most welcome for any further clarifications. Thanks.

Ans: Yes he can purchase 2 properties and claim exemption under Sec 54, (this option is available only once in lifetime).
However, it is suggested to consult CA in order to make calculations and conscious decision with complete details before taking action as there are various factor to be considered before