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TOPIC: Tax on Purchase of Joint Property

Tax on Purchase of Joint Property 2 years 1 month ago #4627

A person sold his property for, 75 lacs and wants to buy another for 50 lacs. The property sold was in his name only but the new property is to be bought by 3 persons--the person himself, his brother, and his nephew. please tell me the following:
1. Are the person's brother & nephew liable to pay any tax for including their names in the purchase of the new property? if yes, is there a legal way to avoid this tax?
2. For the person himself and/or the person's brother/nephew to use the remaining 25 lacs, is some tax to be paid? if yes, is there a legal way to avoid this tax?
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Tax on Purchase of Joint Property 2 years 1 month ago #4658

Hi Mahit,

Is the payment for the new house being made by all three people involved or is it being made by one person while the other people also enjoy the property in their name?

You would need to calculate capital gains on the sale and actual purchase price of the property and if the profits have not been completely invested in the new property, then you might have to pay capital gains tax.

Thanks and regards,
Krish
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Tax on Purchase of Joint Property 2 years 1 month ago #4662

Mr Krish, Thanks for your reply.
i will simplify the question : the complete amount is being re-invested in the new property by the person, the entire payment is to be done by him only but the new property is to be purchased in his and the names of his brother & nephew also. in this situation, are the brother & nephew liable to pay any tax?
and is there a legal way to avoid it?
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Tax on Purchase of Joint Property 2 years 1 month ago #4686

Hi Mahit,

In that case, this would be classified as a part Benaami transaction unless the original owner of 75 lakhs land has gifted the cash for purchase of new land to the nephew and brother. For such a land, the capital gains tax liability for 75 lakhs will lie in the name of the original purchaser/payer. Any future tax on the property or capital gains from sale of 50 lakhs (new) house will fall on all three owners.

Since the value of the nephew's and brother's portion of land is greater than Rs. 50,000, the entire value of their share would be added to the heading "income from other sources" on their tax returns and they would need to pay tax as per their tax slab.

Tax for original purchaser: Capital gains from sale of old property worth 75 lakhs + future property tax and cvapital gain tax on new property worth 50 lakhs
Tax for brother and nephew: One time Income tax on gifts received "Income from other sources" + future property tax and capital gain tax on new property worth 50 lakhs

Thanks and regards,
Krish
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