Query 1]

I have purchased a 3BHK flat in Sagar Avenue at Bhopal in the year 2008 which is registered in the name of my wife. I have borrowed home loan of Rs 10 Lacs from HDFC Ltd for the purchase of above flat. My queries are:

1. Can I sell this flat now though my loan amount is outstanding?
2. Do I have to seek permission of HDFC for selling my flat?
3. If I am able to sell the flat then can I pay the outstanding loan (about Rs. 8.50 Lacs) from the amount so obtained from selling the flat? Is it permissible?
4. What would be my tax liabilities? Do I have to pay the LTCG? If yes, how much?
5. Can I, after paying all the dues, taxes etc, utilize the balance amount for any other purpose other than investing in immovable property?
6. What would be the mode of saving tax on income arising from sale of flat?
7. If the entire amount obtained after selling the flat is deposited in Capital Gains Accounts Scheme then would I be able to repay my outstanding loan and save the LTCG?
8. I am availing the benefit of rebate on income tax towards interest on housing loan as well as principle amount since-2008. If I sell the flat now, what will be the implication? Please clarify.  [Ajay joshi, Korba – adityajoshi463@gmail.com]

 

Opinion:

1. When the property is mortgaged, the property cannot be sold. However, you can execute the agreement to sale mentioning the fact of mortgage and ensuring to clear the dues before you execute the sale deed in favor of the proposed buyer.
2. Advisably, you should get the NOC from the bank as in most of the cases, mortgage agreement incorporate the clause of seeking NOC before executing even agreement to sale also.
3. You need to clear the outstanding dues before you execute the sale deed. Methodically, first of all, you can accept a token amount by having an agreement to sale. This token amount could be used to repay the outstanding dues of HDFC and thereby obtaining the NOC. After getting the NOC & sale deed back, you can execute the sale deed in favor of the proposed buyer.
4. The sale of flat would be attracting capital gain tax. Since you are selling the flat after holding it for more than 36 months, the profit would be taxable as Long Term Capital Gain (LTCG) @ 20%.
   LTCG is required to be calculated by deducting from the sale consideration:
   i] Indexed Cost of Acquisition
   ii] Indexed Cost of Improvement
   iii] Expenses in connection with transfer (like legal expenses, brokerage paid etc).
   For above, Sale consideration is required to be taken as higher of:
   i] the sale price as mentioned in the sale deed or
   ii] Value adopted by the Registrar for the purpose of levy of stamp duty
   LTCG computed above could further be reduce by
   i) the amount of exemption u/s 54 admissible as a result of investment for purchase/ construction of a residential house property
   ii) the amount of unused basic exemption limit. (Unused basic exemption limit is basic exemption limit less other taxable income of the assessee).
5. After paying the LTCG, you are free to utilize the amount the way you want to. There is no barrier or restrictions in utilizing the amount for purchase of immoveable properties alone.

1. Exemption from LTCG:
   In respect of Long Term Capital Gain arising from sale of House property, exemption can be conveniently claim U/s 54EC or u/s 54, as under:
   a) U/s 54EC:
   To save LTCG tax u/s 54EC, one has to invest the amount of Long Term Capital Gain (LTCG) within a period of 6 months from the date of sale/transfer of assets in the specified bonds issued by REC/NHAI. The interest from the bond is taxable as regular income only.
   b) U/s 54:
   Exemption u/s 54 is available if the taxpayer invests amount of LTCG for purchase or construction of another residential house property within a prescribed time as under:
   i] For purchase:
   One year before or two years from the date of Transfer.
   ii] For Constructions:
   Three years from the date of Transfer.
2. As mentioned above, you have to clear the outstanding dues first, even before executing the sale deed. Deposit in the Capital Gain Deposit Scheme (CGDAS) would not directly help you in saving LTCG Tax. If however you intend to purchase or constructs another house property within a period of 2or 3 years, you can keep the amount in CGDAS prior to due date of filing income tax return.
3. Very relevant question.  In your case, there would not be any tax implications on the interest and principal benefit already availed by you as you are selling the house after a holding period of more than 5 years. However, other reader may cautiously note that, under section 80C, if a person is claiming House loan repayment benefit under section 80C and has sold the House within 5 years from the date of purchase of the house then all the benefit availed under this section 80C would be reversed and will be included in the taxable income of the year in which house is sold.

Query 2]

Kindly guide about the amount which can be gift by any parent to married / unmarried adult/major daughter through his /her will, without any liability of gift tax to daughter? If any parents sells property and want to gift amount of sale proceeds to married/unmarried daughter, then what is the rule to prevent tax liability on both the parties? [ vivekkrishkant@yahoo.co.in]

Opinion:

Under the Income Tax Act-1961, the amount of gift to the Children is tax neutral and no liability towards Income Tax/ Gift Tax/ Capital Gain tax arises on the amount of Gift transactions so done between the specified Relatives (neither in the hands of Donor nor in the hands of Donee). Further, there are no restrictions on the quantum of gift that can be by parents to daughter (married or unmarried). After gifting in the amount, the resultant income would be taxable in the hands of daughters if she is a major. If she is a minor, income would be subject to clubbing provision u/s 64(1A) of the I.T. Act, 1961.
[General Comment: Readers may note that the clubbing provision is not applicable in case income is derived by the minor from manual work or from any activity involving his skill, talent or specialized knowledge or experience.]

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