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I am a senior citizen. I borrowed ₹5 lakh in January 2005 from my brother. Subsequently, in June 2005, I conveyed my residential property to my brother through a sale deed, accepting the borrowed money as consideration. I have been occupying the property as a tenant ever since. Now, my son, who is an NRI, proposes to get the property back in September 2020 from my brother through a sale deed, paying ₹19 lakh as consideration. The government-approved fair value is ₹17.6 lakh. My brother is also a senior citizen now and has no income other than interest income of ₹87,000 and rental income of ₹5,000 per month. Your earnest advice is requested on the tax liability for my brother from the transaction. Please also advise how I-T for AY21-22 will have to be computed, taking interest income, and also which ITR form has to be used.
G Joseph
I understand that for FY2020-21 (AY2021-22) your brother (who is a senior citizen) will have the following income in his hand: (1) Interest income of ₹87,000, (2) Rental income of ₹30,000 (₹5,000 per month from April 2020 to September 2020), (3) Long-term capital gains (/loss) on sale of immovable property as per below calculation.
As the property was acquired by your brother in FY2005-06, the same qualifies to be a long-term capital asset. I also understand that your brother is expected to qualify to be a Resident and Ordinarily Resident in India for FY2020-21.
*After considering the benefit of progressive slabs (your brother being a senior citizen) and the maximum amount not chargeable to tax being ₹300,000, LTCG (after adjusting the available slab rate benefit) is taxed at the special rate of 20 per cent.
Notes:
a) It has been assumed that the interest income is bank/post office interest.
b) It has been assumed that no other exemption under Section 54/54EC of the Income Tax Act has been claimed.
As per the forms applicable for AY2020-21, for the aforesaid incomes, you are required to file ITR-2.
However, the same shall be subject to AY2021-22 forms (which are released by tax authorities on a year-on-year basis).
The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in
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