Adding a Name or Writing a Will: The Golden Rules for Property Inheritance
[Query 1]
I am in the process of buying an apartment and registering the same in my name as well as my wife’s name. I have a few queries regarding the same.
1. I have only one son. Is it advisable to add his name in the registration, because we both are 70 and above?
2. As my son is an Income tax assessee, would it make any difference in his tax return? Is it necessary for him to declare this property in his IT returns although his name will be third in the registration?
3. Lastly, which is better: a Will or adding his name in the registration document so that he can acquire the property after us?
Opinion:
Ah, the joys of property ownership and family dynamics! Let’s enter into your queries with a pinch of humor to keep things engaging—because taxes and real estate don’t have to be dull!
1. Should you add your son’s name to the registration?
Well, you could, but that’s like letting someone else hold a set of keys to your prized vintage car—before you’ve finished enjoying the ride. Yes, he’s your beloved son, and yes, you trust him, but co-ownership comes with strings attached—legal ones! Once his name is on the deed, he gets a legal say in all property matters. Think of it this way: imagine you and your wife decide to sell the property someday. Suddenly, you’re explaining your decision to a “third referee” (your son) who now gets to weigh in. Behind the scene, there may be 4thone, all the more powerful. If you’re comfortable with this potential family board meeting for every property decision, go ahead. Otherwise, hold those reins tight!
2. Does he need to declare this property in his Income Tax Returns? Any Tax implication on him?
If your son’s name is added to the registration, here’s what might happen:
a) Mandatory disclosure: The property will need to make a guest appearance in your son’s Income Tax Returns under the Assets and Liabilities schedule, especially if it’s worth more than ₹50 lakh. The tax department doesn’t care if he paid for it or not; mere ownership makes it reportable.
b) Rental income implications: If the property generates rental income, even if just a nominal amount, your son will need to declare his share and pay tax on it.
c) Notional Tax on Rent: Here’s the kicker—if he owns more than two properties, the tax department can consider up to 2 properties as self occupied and others are deemed to have been let out, even if it’s just gathering dust. This means he’ll need to pay tax on “notional rent” for those third or other properties on deeming basis for his share, even if no rent is actually earned.
In short, adding his name might give him more paperwork than pride—and possibly a few sleepless hours during the tax season.
3. What’s better: a Will or adding his name?
Adding the name in the sale deed is like giving him a permanent seat at the table right now. On the other hand, a Will is like you stay in the driver’s seat until you’re ready to pass the baton (or steering wheel).
Here’s why a Will wins this round:
a)Flexibility:A Will is easier to revise. Want to leave a portion to charity or change beneficiaries? No problem.
b)Control:With a Will, you and your wife retain full ownership and decision-making power over the property during your lifetime.
c)Cost-effectiveness:A Will saves you from paying additional registration fees or stamp duties now.
4. Suggested Course of Action:
In my personal opinion, if anyone wishes to enjoy the golden years without property-related “board meetings,” go with a Will. It’s flexible, affordable, and keeps the property transfer process simple after your time. Stick with a registered Will. Keep the keys to your property, the peace in your family, and the taxman happy.
Based on your situation, where the primary goal is to ensure your son inherits the property without unnecessary complications, a registered Willis your best bet. It provides:
i. Full control over the property during your lifetime
ii.A clear, legally binding way to transfer the property to your son.
iii. Avoidance of tax or legal complications during your lifetime.
[Query 2]
Kindly guide me how to save tax on LTCG from listed equity shares. Can you please advise me of all the available alternatives at the earliest since sufficient time is available to plan for specific selected alternatives? Can I save tax by investing in Capital Gain Bonds?
Opinion:
1. Tax on Long Term Capital Gain (LTCG) arising from sale of equity shares can be saved by claiming an exemption under section 54F. For exemption U/s 54F, taxpayers need to invests the amount of net sale consideration for purchase or construction of residential house property within a prescribed time frame, as under:
i] For purchase:
One year before or two years after the date of Sale/Transfer.
ii] For Constructions:
Three years from the date of Sale/Transfer.
2. Option to save tax by investing in the specified bonds is available only if the LTCG is arising from sale of land or building or both. It is not available if the LTCG is arising from sale of any other assets.
[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & responses to queries are available at www.theTAXtalk.com].
