Your Taxes

I am a retiree, with no taxable income. My father left behind a property in his name which I plan to sell and distribute the proceeds to my three sisters. They have given me power of attorney to sell this property. Based on legal heir certificate, NOC from my sisters and power of attorney, I am selling the property. Should I or my sisters pay income tax on this transaction?

S Nagarajan

We understand that the power of attorney executed in your favour is solely for the purpose of selling the property and the same is not a family settlement for the property.

We also assume there is no will executed by your father for such property.

Each heir is entitled to their respective shares (one-fourth share for each— you and three sisters). Capital gains arising from the sale of property shall be taxable in the hands of each heir separately.

The cost of acquisition for each heir shall be one-fourth the cost of the property, for which the previous owner had acquired the same, and the period of holding shall be considered from the date the previous owner had held the property.

In case the property is held for more than 24 months before the date of sale, the gains arising on sale of such property shall be termed as long-term capital gain and subject to tax at 20 per cent (after providing for indexation benefit for cost inflation).

In case the property is held up to 24 months, the gains arising on sale of property shall be termed as short-term capital gains and shall be taxed at the applicable slab rates of the respective heir.

We have presumed that the property is acquired by your father on or after April 1, 2001.

In October 2014, we purchased a residential property in Mumbai for ₹2.65 crore. The property was registered in the name of my wife the loan was taken jointly by me and my wife.

My wife, being a housewife, has no major income to support repayment of her share of principal and interest. All payments have been made by cheque through our joint account. What is the tax liability on this arrangement, on me and my wife?

Balaji

As per the Income Tax Act, 1961, repayment of interest on housing loan and also the principal repayment is allowed as deduction (up to the specified limits) from the taxable income.

I understand that although the loan is in joint name with your wife, the re-payment is being made completely from your funds.

Thus, you shall be considered as the ultimate owner of the property and the income, if any, arising from the property shall be taxable in your hands.

Also, the deduction for interest and principal repayment of the housing loan shall be available to you and will be claimed in your tax return.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

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