We are three brothers and one sister. We inherited one house in Delhi by registered will of my father. Mutation was done accordingly  and property was converted to freehold and conveyance deed was registered having equal shares, though not mentioned specifically. Now we want to sell the property. My brother and sister living abroad are ready to take lesser share. Should we go for relinquish deed for reducing their share? Will stamp duty be charged ? What are the capital gains tax implication. Who will pay the cap gain tax, releasor or releasee? Releasor  is not gaining any thing.They can’t go for gift deed before sale because they will have to pay heavy gift tax abroad.

Solution:

1.Capital gain tax liability arises at the time of  “transfer”.

2. “Relinquishment of Right” in the property tantamount to “transfer” and result in capital gain.

In shirt, there will be a tax liability whenever the relinquishment deed” is executed.

3. Gift of the property in between the relative is not taxable. So, it is already advisable to execute the gift deed in such cases.

4. In your specific case, few of the owner are in USA and they would be liable to tax in USA if gift deed is executed. So,  you don’t want to go for the gift deed for concluding the transactions.

In such case, it is advisable to execute a “Family Settlement Deed” clarifying the ownership in the property inherited from  the father and rectifying it by mentioning the correct share in the property. The “family settlement deed” executed will not have any rectification.

Hope it will clarify Your Doubt.