Tax liability on sell of a gifted property

Sir, At what rate will the sale amount of a freely gifted residential land property by one real brother (who owned it for nearly 20 years ) to another brother (Registry also done in his name last year at the time of gift) suffering from malignant grade 4 brain cancer will be taxed if he has to sell it within 3 years of gift being given? Will the holding period of both the brothers will be clubbed in this case and accordingly will the Capital gains be short term or long term and can purchse of new property/investing in tax free NHAI/PFC bonds after selling it help save Capital gains in this case? Sir, an urgent and precise reply will be of immense help in taking decision to sell or not to sell this property.



Dear Atuleshyadav, As the property was hold for 20Y by one brother & then gifted to another brother thru registered transferred deed. For your information, the period of holding `ll be considered from the earlier 20Ys & his own holding period for the 2nd brother as the gift is done between two real brothers & it`s acceptable as per income tax rules.

Now thru an example if i assume that the property was purchased in FY 1988-89 by the first brother, & transferred to 2nd brother in 2008-2009 (20Y holding) & now the sell of the land is executed in current FY 2010-2011, the gains `ll be LTCG & `ll be eligible for indexation.

At the same time, the seller of the plot has the option, to either invest the gain amount to purchase a house or to invest in Cap. Gains Tax saving bonds of RES & NHAI.

Plz. feel free to ask if u need more help.



Thanks a tonne for your reply as I had to post this message here as I was not getting answers over google to my query or on the tax pages over there. Actually my CA told me that there are conflicting rulings from IT department over such issues and I did`nt want the issue to be messed up or to pay Short term Capital Gains tax.So in this light do you advise me with going ahead sell of the said property as I would be requiring money ?



Dear Atul, As the gifting was done between 2 real brothers, the gift in question was an immovable property. The property transfer registration was done in the name of recipient of the gift. All the conditions are fulfilled to be eligible for a valid tax free gift.

So the Long Term gains rule `ll apply counting from the original purchase date of the 1st brother (the donor).

As u r in need of money, u may sell ur property. For Cap. Gains part u have the options –

1. Pay LTCG Tax @ 20.6% rate & use remaining amount as per ur requirement
2. Purchase a residential property, priced at least equal to or more than the LTCG amount.
3. Invest the Gain amount in Cap. Gain Saving bonds of NHAI or REC.



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