What should the maximum age of a 75-year-old senior citizen be when selling property to his third son, excluding the first two daughters and fourth son?

Ans: Inherited property is taxed in hands of the legal heirs when the property is sold.

Retired or not is not a criteria for taxation.

First, you need to know the market price of the property in 2001 which is a base year.

As the property held for more than 24 months the gains from the property will be termed as long-term capital gains (LTCG). This capital gain is taxed at 20% (plus surcharge and cess) after considering indexation from the fair market value as of 2001.

Ans: Your parents are selling a property for Rs. 2.25 crore. They are buying a new one for Rs. 1.8 crore. Let's break down the costs and implications.

Stamp Duty and Registration Charges
New Property Purchase
For the new property, stamp duty and registration charges apply. These charges vary by state. On average, stamp duty is 5-7% of the property value. Registration charges are around 1-2%.

Estimated Charges
If we assume 7% stamp duty and 2% registration fee on Rs. 1.8 crore:

Stamp duty: Rs. 12.6 lakh
Registration fee: Rs. 3.6 lakh
Total: Rs. 16.2 lakh

Society Transfer Charges
Society transfer charges may also apply. These vary by society but are typically nominal.

Capital Gains Tax
Calculation of Capital Gains
When selling the property, capital gains tax is applicable. The gain is the sale price minus the purchase price and indexed cost. Assume the purchase price and other details are such that the gain is significant.

Exemption for Reinvestment
If your parents reinvest in another property, they may get capital gains tax exemption under Section 54. This exemption applies if the new property is bought within two years or constructed within three years.

Estimated Capital Gains Tax
Without exact figures, it's hard to calculate. But reinvesting in a new property can reduce or eliminate this tax.

Net Amount in Hand
Sale Proceeds
Sale proceeds: Rs. 2.25 crore

Purchase and Other Costs
New property: Rs. 1.8 crore
Stamp duty and registration: Rs. 16.2 lakh
Total: Rs. 1.962 crore

Surplus
Sale proceeds minus purchase and other costs: Rs. 2.25 crore - Rs. 1.962 crore = Rs. 28.8 lakh

Investment Options for Surplus
Mutual Funds
Mutual funds are a good choice. They offer better returns compared to traditional options. Actively managed funds can provide tailored solutions. They help in diversifying investments.

Bank Deposits
Fixed deposits offer safe and steady returns. Banks provide special rates for senior citizens. Recurring deposits are also a good option.

NBFC Deposits
Company fixed deposits offer higher returns than bank FDs. Ensure the NBFC is covered under DICGC. Check the credit rating before investing.

Post Office Schemes
Senior Citizens Savings Scheme (SCSS) is a great option. It offers higher interest rates and regular income. Post Office Monthly Income Scheme (POMIS) is also reliable.

Important Considerations
Diversification
Spread investments across various options. This reduces risk and enhances returns. A balanced portfolio ensures stability and growth.

Risk Assessment
Understand the risk tolerance of your parents. Choose investments that match their risk appetite. Safe options like FDs and SCSS provide stability. Mutual funds offer growth potential.

Liquidity
Ensure investments are liquid enough. Your parents may need funds for emergencies. Opt for investments that can be easily accessed.

Professional Guidance
Seek advice from a Certified Financial Planner. They can provide a customised investment plan. Their expertise ensures informed decisions.

Final Insights
Selling and buying properties involves many costs. Understanding these helps in better planning. The surplus from the sale can be invested wisely. A balanced approach ensures stability and growth. Diversify investments and consider risk and liquidity. Professional guidance can enhance the investment strategy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: I offer my following suggestions for your points of concern :
01. The Buyer will make payment to the owner of property. Has property been transferred in favor of both of you ?
If Yes, then he shall make payment to both of you, separately, as desired by you.
02. The buyer should not make any direct payment to your sister.
After receiving the sale proceeds, both of you, may Gift some amount to your sister. It will be a separate transaction. Please note that your sister will not have any income tax implications, in case of gift from brothers.
03. You are free to use the sale proceeds of property in any way, even for re-payment of housing loan.
04. You need to work out LTCG in both ways, i.e., 20% with Indexation & 12.50% without Indexation. You may choose the option, in which you tax liability is minimum.
Most welcome for any further clarifications. Thanks.

Ans: Dear Friend,
If you’re considering whether to purchase your brother’s share of the inherited property for ?4 crore, weigh peace of mind against financial returns. Buying his share gives you full control, eliminates potential disputes with a third-party buyer, and ensures no interference in your peaceful living. However, the rental yield of ?60,000/month (~1.8% annual return) is significantly lower than the ~8% return you could get by investing ?4 crore in fixed deposits or bonds, which would generate ~?2.67 lakh/month.

Regarding the terrace, your brother cannot sell his 50% share independently since it is undivided and jointly inherited. Any sale requires your consent, limiting his ability to transfer full terrace rights to a new buyer.

Redevelopment of the property is an excellent option, offering increased value and rental income. Builders are likely to provide additional floors or cash components in exchange for development rights, enhancing long-term financial benefits and ensuring modern amenities.

If your priorities are peace of mind and control over the property, purchase your brother’s share. Otherwise, invest in safer financial instruments and consider redevelopment to maximise the property’s potential. Consult a lawyer and financial advisor to ensure the best decision. Your Financial adviser can deeply evaluate all your assets and liabilities and provide a solution which will give you more leverage.
Regards, Nitin Narkhede -Founder Prosperity Lifestyle Hub,
Free webinar https://bit.ly/PLH-Webinar

Ans: Given your situation and your priorities, buying your brother’s share in the property involves both financial and personal considerations. Let’s break it down:

Financial Consideration: Purchase for Rs. 4 Crore
Investment Potential:

If you purchase your brother's share for Rs. 4 crore, this is a significant outlay. This amount would be locked in the property, and you will not have liquidity for other investments.
The potential annual rental income of Rs. 7.2 lakh (Rs. 60,000 per month) from the ground floor would give you around 1.8% return on your investment (before expenses).
While the property provides rental income, it is important to evaluate whether this income is enough to justify tying up such a large sum in real estate. With Rs. 4 crore in fixed deposit or RBI bonds, you could earn around Rs. 32 lakh annually (at an 8% interest rate), providing better liquidity and diversification.
Liquidity:

Investing in property reduces your financial flexibility. If you need funds quickly, liquidating property could take time and may not be as efficient as keeping cash in a fixed deposit or bonds.
Fixed deposits or bonds would offer guaranteed returns and the flexibility to access funds without the complexities associated with property ownership.
Peace of Mind vs. Financial Flexibility:

Your main concern about purchasing the property is to ensure peaceful living. While this can be a valid reason for staying in the property, from a financial perspective, an alternative investment like fixed deposits or bonds might provide a better balance of risk, return, and liquidity.
Comparing Bank Fixed Deposit vs Property Investment
Bank Fixed Deposit:
Interest income of Rs. 32 lakh annually (assuming 8% return on Rs. 4 crore).
High liquidity, no maintenance hassles, no risks associated with property market fluctuations.
You can invest in RBI bonds, which also provide tax benefits and security.
Property Investment:
Rental income of Rs. 60,000 per month (Rs. 7.2 lakh per annum).
Long-term capital appreciation potential, but not guaranteed.
High investment lock-in (Rs. 4 crore) with limited liquidity.
Property maintenance, taxes, and the possibility of tenant-related issues should be factored in.
Legal Question: Selling the Terrace Share
Your brother wishes to sell his share in the property, including the terrace rights. Here’s the challenge:

Undivided Rights:
The terrace is an undivided right shared between you and your brother. This makes it more difficult to sell it separately unless both parties agree to sell the entire property or agree to transfer the right to one party.
Selling Procedure:
Since the terrace is an undivided share, your brother cannot sell it without your consent unless there is a formal agreement. You both need to either:
Execute a separate agreement on the share of terrace rights.
Decide whether the property sale includes the terrace rights, or if he will only sell his ground-floor rights.
Recommendation:
If your brother is serious about selling, you may want to get a lawyer’s opinion on how best to formalize the sale of terrace rights. If you wish to maintain control, you might want to agree to a sale that retains your joint ownership of the terrace.
Redevelopment Proposal
There are multiple builders interested in redeveloping the property, which presents a few options:

1. Redevelopment for Additional Floors
Pros of Redevelopment:

Redeveloping the property into a four-floor building with basement and stilt parking could significantly increase the value of the property.
New, modern construction could offer higher rental income and capital appreciation in the future.
If the builder offers you a share of the redevelopment or compensation for temporarily moving out, it might be an attractive deal.
Cons of Redevelopment:

The process of redevelopment can take years and may cause inconvenience, especially if the work is happening around your existing residence.
Redevelopment may lead to uncertainty about the final outcome, as builders may face delays or changes in plans.
You may be asked to move temporarily, which can be uncomfortable and time-consuming.
2. Selling the Property
Selling the Property:
If you prefer peace of mind and less involvement with the property, selling to a third party may be a better option.
The sale could generate significant liquidity (Rs. 4 crore), which you could invest in financial instruments, giving you higher flexibility and more options for growth.
However, this would mean losing the rental income and potential capital appreciation from the property.
3. Keeping the Property As Is
Keep the Property:
If you are satisfied with the current rental income and your primary goal is a peaceful living environment, keeping the property could be the best choice.
This option avoids the disruption of redevelopment or selling but may limit future financial growth if the property does not appreciate much in the coming years.
Recommendations and Final Insights
Financially, Based on Your Situation:
If You Prioritize Peace and Stability:

Purchasing your brother’s share might be a good option for ensuring peace of mind. You would secure full control over the property and avoid interference from new buyers. However, the financial return on investment is modest when compared to other options.
However, this comes at the cost of reduced liquidity and potential for more efficient investments in fixed deposits or bonds.
If You Prioritize Higher Returns:

Keeping the Rs. 4 crore in fixed deposits or RBI bonds would generate better returns (Rs. 32 lakh annually), with much higher liquidity and safety. You can continue to live in the property as it is and enjoy stable rental income.
Selling the property (or your brother selling his share) could allow you to reinvest in higher-return investments, but it would also mean giving up the peace and stability that comes with staying in the inherited property.
Legal Considerations:
For the sale of the terrace, you must have a clear agreement between both parties on how to handle the undivided rights. This could involve getting a legal professional to create a formal agreement if your brother decides to sell his share to a third party.
Redevelopment Options:
If you and your brother are both open to redevelopment, carefully assess the offers from builders. Consider the long-term benefits of redeveloping the property into a four-floor building with basement parking. However, you need to weigh the inconvenience caused by redevelopment and the potential risks.

Alternatively, if you prefer stability and don’t want the hassle of redevelopment, keeping the property and enjoying the rental income might be a more comfortable choice.

Finally, given your specific situation, it would be helpful to discuss this in greater detail with a certified financial planner to ensure that the right option aligns with your overall financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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