Photo: iStock
Photo: iStock

Gain from sale of land is not tax-exempt in hands of parent even if it’s gifted to child

The gift a son receives from his father is not treated as taxable income, but it is advisable to make a gift deed

My father bought a non-agriculture land for 2 lakh in 2003, which he wants to sell for 20 lakh and give the money to me. Will my father have to pay LTCG tax? Will the money be taxable in my hands?

—Pavan Kumar Nadimpalli

Any gains made by your father on the sale of a non-agricultural land is taxable as capital gains. As the land has been held by your father for more than 24 months from the date of acquisition, the gains are taxable as long-term capital gains (LTCG). LTCG is computed as the difference between the net sale proceeds and the indexed cost of acquisition. Indexation refers to adjusting the cost of the asset based on the cost inflation index (CII) published by the income tax department for FY of purchase and FY of transfer.

The gain from this sale will be subject to tax at the rate of 20% (plus applicable surcharge and cess), unless your father is eligible to claim a tax exemption. This exemption is available only if he invests the net sale proceeds towards the purchase/construction of one residential house property in India within specified timelines and satisfaction of other specified conditions. Alternatively, tax exemption is available if the capital gains are re-invested into specified bonds subject to specified timelines and satisfaction of other specified conditions. This tax exemption is not available to him if he has gifted the proceeds to you.

The gift you receive from your father is not treated as taxable income in your hands. It would be advisable to document this receipt by way of a gift deed.

I lost my job and have no earnings this year. Do I still need to file income tax returns?

—Name withheld on request

If your aggregate gross income (prior to claiming specified deductions such as life insurance, PPF investment, medical insurance, donations, bank interest etc.) for the relevant financial year (FY) did not exceed the threshold limit (₹2.5 lakh, assuming you did not qualify as a senior citizen), you would ordinarily not be obligated to file a tax return (presuming that being an ordinary resident of India you do not have any asset/beneficial interest in an asset outside India at any time during the financial year or you do not have any TDS on any of your other income to be claimed as a refund).

To read more queries, click here

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

Close