My two brothers and I purchased a house in 1992. The sale deed did not specify the individual shares of the brothers. Now we intend to sell it. Each one of us would be constructing or acquiring a house separately out of the cash received on the sale of the existing house. Is there a difficulty in getting exemption from the taxability of capital gains in the hands of individual co-owners?
Since the shares of the co-owners have not been specified, the capital gains arising on the sale of the residential house can be assessed in the status of association of persons. If this course is adopted by the tax authorities, exemption to individual co-owners would not be allowed. This aspect is supported by a decision of the Supreme Court in the case of CIT v/s Indira Balakrishna (1960) (39 ITR 546) (SC).
It will be in the interest of individual co-owners to get a court decree, specifying the shares of each co-owner before such sale so that the benefit of the exemption available under section 54 can be claimed by each co-owner.
I booked a flat during its pre-launch phase last year. The flat has been allotted to me but I will get its possession after two years. If I sell this under-construction flat and buy another flat, will I be liable to pay capital gains tax? The new flat will be of higher value.
The transfer of the right in a property, which is under construction, is considered a capital asset and transfer of such right would result in levy of capital gains tax. Thus, if you sell the property under construction, any gain arising on such transfer shall be subject to capital gains tax. However, if you invest the net amount received from the sale of such a right held for not less than three years to buy another property, the capital gains shall be exempt, provided certain conditions are met.
My brother and I have taken a joint home loan. The equated monthly instalment (EMI) of the loan is debited from my brother’s account and I transfer half the EMI amount every month to his account. Can we both show this amount for income-tax declaration? If yes, then what documents would be required?
You have not mentioned in your question whether the property is jointly owned by you or not. For claiming deduction of interest, the ownership of property is the foremost condition. Presuming that the property in question is jointly owned, both you and your brother would be entitled to deduction of interest.
Proof of ownership, loan documents and proof of repayment would be required for this purpose.
Sachin Vasudeva Senior partner, SC Vasudeva & Co. Chartered Accountants
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