I am 41 years, married and and reside in Bengaluru with wife and daughter. I, my brother, my mother and sister have decided to sell our house which was bought in August 2010. This house is on my late father’s name. We had bought the house at Rs 20Lakh and plan to sell it for Rs 65Lakhs. Can you tell me how much tax each of us has to pay? Can this tax be saved? If I take this house as a gift and sell it to a third party, will it reduce my tax liability? Kindly advise.
The sale of the house property inherited by you and your family will attract capital gains tax. As the property is inherited, the period you have held this property would include the period of holding by your father. If the property was held for more than 24 months, the gains resulting from the sale would be taxable as (LTCG). 1. You will be taxed in respect of your respective share of LTCG at 20.60% (plus applicable surcharge), in respect of your share. Each person’s share (You/Mother/Brother/Sister), will be decided based on the amounts distributed to each individual as sale proceeds. 2. Each one of you can claim an exemption from such capital gains tax, under section 54 of the Income-tax Act, 1961 (the Act) if the LTCG is re-invested in the purchase / construction of a residential house in India. Alternatively, you may invest the capital gains in specified bonds for claiming exemption from taxes, up to Rs 50 Lakhs. If the property is gifted to you by your family, you will now become the sole owner of the property and will need to pay taxes on the entire LTCG instead of paying taxes only on your share of the LTCG arising from the sale.