My wife is going to sell our 3BHK Apartment in Mapusa, Goa and around Rs32L will accrue as capital gain. We wish to invest the indexed price amount in the pension scheme whilst the capital gain will be distributed among two daughters Akhila and Amrita. I have asked Amrita to use her share in repayment / part payment of the housing loan and the share of Akhila will be used for purchasing a flat/ residential property.
Will the above plan help in saving capital gain tax?
What if they deposit their share / go for investment in mutual funds?
What is going to be the liability of the heirs in case the parents distribute the capital gain amount?
In my opinion if a senior citizen sells his only residential property the capital gain tax should not be applied. In my case when I distribute the CG amount to my daughters and they use it to either pay back their housing loan or purchase a new residential property the benefit as per the relevant income tax act should be applied and the benefits should be given to the wards.
Ans: The capital gains tax is applicable to the individual on whose name the house stands at the time of selling. Since the property is in your spouse’s name, capital gain tax will be payable by your spouse. Any tax planning like investment in Capital Gains Bonds or in another property would need to be in your spouse’s name only.
There is no exemption for senior citizens or for single house.
To save tax on sale of the property, the capital gain must be invested in your spouse’s name either in 54 EC Bonds (max limit of 50 lakh) or in a new house, within the required periods. Otherwise, your spouse will have to pay the relevant tax, post which she can make gifts to relatives without tax incidence on the gift (relative as defined in the IT Act).
