Query 1]

This query is regarding the gift money and tax implications. As per my knowledge, there is no gift tax payable when amount received from close relatives like father, mother, brother and sister etc. Now, my query is about the gift. Recently my father-in-law has sold a land (ancestors land which he got through his parents). The amount received by him in the form of bank cheques as per the sale agreement was equally distributed to his children by giving his bank account cheques to his 3 daughters and 1 son. Out of 3 daughters, 1 daughter is my wife as a receiver of gift money. Now, please clarify whether any tax implications are there for my father-in-law for money received after sale of land and for 4 children for money received from their father as gift money? Are there any papers required to prove the amount as gift money? Whether any TDS to be done on the amount of gift? And also, please clarify the tax implication if the money is returned back by all or some of the children to their father due to any reasons? [Murthy Kolla VSSR – kolla_srm@rediffmail.com]


Gift received by an Individual from any of the following person is totally tax free:
(i)        spouse of the individual;
(ii)       brother or sister of the individual;
(iii)     brother or sister of the spouse of the individual;
(iv)      brother or sister of either of the parents of the individual;
(v)       any lineal ascendant or descendant of the individual;
(vi)      any lineal ascendant or descendant of the spouse of the individual;
(vii)    spouse of the person referred to in clauses (ii) to (vi).

In your specific case, the recipient has received the gift from relative (i.e., father) & so it would be totally exempt from tax.

For the purpose of Income Tax Act-1961, gift of a moveable property can be done by executing the gift deed simply on a plain paper. Registration is not mandatory for gift of moveable property. However, for Gift of immoveable property, Registration is compulsory under the Registration Act.  There is no specific provision/ Law to inform the IT Department about the gift done or to be done. Also, the gift transaction is outside the TDS basket. If the gift is not accepted & returned back, the transaction would remain tax neutral.

Now, the important part of the query. Long Term Capital Gain (LTCG) arising from transfer of any long term capital assets (i.e., assets with a holding period of more than 36 months) is to be calculated by deducting the following from the full value consideration:
(a) Indexed cost of Acquisition
(b) Indexed cost of Improvement
(c) Expenses incurred in connection with transfer (like brokerage, legal expenses etc)

The property sold is an ancestral property (acquired before 01.04.1981). The fair market value of the property as on 01.04.1981 can be taken as cost of acquisition for computing the LTCG.
Father in law would be receiving the amount from sale of a land. At the first instance, the profit on sale of the property would be taxable as Long Term Capital Gain (LTCG). Gifting or dividing the amount after accrual of income doesn’t reduce the tax bill.

Query 2]

Can we get the Tax benefit on Housing Loan Interest and Installment where the house is given on rent (non- self occupancy) and showing the income on Rent? Please advise.



Housing loan benefit in the form of deduction towards interest u/s 24(b) and towards principal repayment of a residential house property u/s 80C is available even in respect of let out house property.  Better part is that, deduction towards interest payment u/s 24(b) is not restricted to maximum cap of Rs. 2 Lacs (Rs. 1.50 Lacs, up to FY 2013-14). Entire interest is deductible against rental income without any upper monetary ceiling.


Query 3]

I am in the process of acquiring an under construction immovable property worth Rs. 40 Lacs, for which I have paid around Rs. 10 Lacs including registration and stamp duty. I have filed IT return for AY 2014-15 without above transaction. My query is, am I eligible for rebate under IT. How can I modify my return? If yes, do I need to seek the permission of income tax officer for modifying the return? [barve_shailendra@yahoo.com]


Deduction towards interest on housing loan taken merely for purchase of uncompleted structure is not eligible for deduction.  Only after the completion of house, deduction would be admissible. Interest of pre-construction period is deductible in five equal annual installments commencing from the year in which the construction is completed. There is no such stringent bar towards claiming a deduction u/s 80C against Stamp duty/ registration expenses & principal repayment. Deduction could be claimed even if the house property is incomplete.

Taxpayers have an option to revise the income tax return if there is/are some error, omission or wrong statement etc in the original return. Revise return can be filed any time within one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. However, option to revise the return is available with the taxpayer only if the original return is filed within the DUE DATE of filing & not otherwise. No prior permission from the authorities is required for revising the return.

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