Hi Gurus, My father recently sold a property and gain some amount which is parked in a capital gain tax account. We have not finalized the property that we would like to invest in. But the property is costing more than what my father got, can I (Son) or my wife (daughter in law) transfer amount to him which he will use in buying the new property? The only reason is I don't want to be a co partner and miss out on any benefits there are for the first time buyer. Or is it okay to be a co partner and there are actually minimal impact on been a first time buyer of any property.

Ans: Thank you for asking such a smart and timely question.
It shows you’re thinking about long-term value and tax efficiency.

Let me now guide you with a clear, detailed answer from all angles.

? Understanding the Capital Gains Account Scheme (CGAS)

– Your father has parked the sale proceeds in a Capital Gains Account.
– This account allows capital gains to be temporarily held, tax-free.
– It is meant to be used to buy or build another residential house.
– The funds must be used within 2 years (purchase) or 3 years (construction).
– If not used, the unutilized capital gain becomes taxable after that period.

– So, time is ticking. But it’s good your father is taking cautious steps.

? Can Son or Daughter-in-law Give Funds to Father for New Property?

– Yes. You can legally gift or transfer funds to your father.
– There is no tax on gift from son or daughter-in-law under the Income Tax Act.
– The money received by your father from you is not considered income.
– It can be added to the total cost of the new house.
– But keep proof – a gift deed (preferably notarized) is highly recommended.

– This will protect your family from future queries by the tax department.

? Ownership Rules When CGAS Funds Are Used

– The property purchased using CGAS must be in the name of the person who earned the capital gain.
– So, if your father claims exemption under Section 54,
– the new property must be registered in his name only.

– If he makes it a joint purchase, the full exemption may get denied or reduced.
– You being a co-owner can be risky for his tax benefit.

– Hence, it's safer if you transfer the funds to him, but he buys it only in his name.

? Impact of You Being a Co-Owner – Should You Avoid?

– If this is your first home purchase, you can claim benefits:

Rs 1.5 lakh under Section 80C on home loan principal.

Rs 2 lakh under Section 24(b) for interest.

Possibly additional Rs 50,000 under Section 80EE (if eligible).

– If you become co-owner, this may count as first property for you.
– You may lose the first-time buyer benefits when buying your own house later.
– That’s why your concern is very valid and thoughtful.

– So, avoid being co-owner if you plan to buy a home in future using loans and want deductions.

? Who Should Own the New Property – Father Alone or Jointly?

– For full capital gains tax exemption under Section 54,
– Your father must be sole owner of the new property.
– If the property is more expensive, you can gift the shortfall to him.
– But he should fully pay and register it in his name.
– Avoid joint ownership even if you contribute financially.

– This will keep both tax benefit and your future plans clean.

? Can the Gifted Amount Be Repaid Later by Father?

– Technically, it should be a gift, not a loan.
– If your father repays you, it may appear like a disguised transaction.
– The tax department can question intent.

– So, keep it clean. Make it an unconditional gift.
– Avoid repayment or interest. Maintain records clearly.

? Legal and Tax Records to Keep

– Make a Gift Deed with signatures from both sides.
– Mention the amount, mode of transfer, and relationship.
– Use bank transfer and avoid cash.
– Keep the capital gains account deposit records safely.
– Also retain property purchase papers and registration in your father's name.

– These will protect your family from future tax issues or disputes.

? Should You Wait or Buy in Joint Name Anyway?

– If your own house purchase is still many years away,
– then being a co-owner with your father now may not hurt.
– But still, you won’t qualify as first-time buyer later.
– So, that long-term loss may not be worth it.

– It is better to remain flexible by not becoming co-owner now.

? What If Father is a Senior Citizen?

– If your father is above 60, he may not need loan.
– So, joint ownership for loan eligibility is unnecessary.
– That’s another reason why he should buy independently.
– This also avoids clubbing issues in future income tax.

? Alternative Ideas If Father Doesn’t Want to Use Full Amount Now

– He can buy a smaller house matching capital gains.
– You can independently buy your own home later.
– Or he can invest balance capital gain in specified bonds under Section 54EC (Rs 50 lakhs max).
– But those are illiquid and not ideal for retired life.

– Hence, buying one house using his name only is the most tax-optimal strategy.

? Final Insights

– You are thinking the right way by protecting both tax benefits and family clarity.
– Gifting funds to your father is fine. But co-ownership is not ideal for either party.
– A gifted amount is better than joint ownership, especially if you plan your own house later.
– Keep all documentation clear to avoid legal or tax confusion.

– Always aim for simplicity, legality, and family harmony in such high-value decisions.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment