HT Estates - - Front Page - Harsh Roongta

I own a 1BHK res­i­den­tial prop­erty in And­heri where I cur­rently live. My other prop­erty, which is a 2BHK at Ban­dra, has been given on leave and li­cence. I also have a third prop­erty which is a com­mer­cial of­fice. If I sell this com­mer­cial prop­erty can I buy a res­i­den­tial house and give it on leave and li­cense? Shall I have to pay in­come tax? What are the tax im­pli­ca­tions?

—M A Shaikh In case you have held this third com­mer­cial prop­erty for 36 months or more, any cap­i­tal gains aris­ing on its sale shall be treated as longterm cap­i­tal gain.

Since you are al­ready hold­ing two res­i­den­tial prop­er­ties, you can not take the ben­e­fit of ex­emp­tion un­der Sec­tion 54 F of the In­come Tax Act. How­ever, you can avail the ben­e­fit un­der Sec­tion 54 EC by in­vest­ing cap­i­tal gains in bonds of ei­ther Ru­ral Elec­tri­fi­ca­tion Cor­po­ra­tion of Na­tional High­way Author­ity (NHAI) within six months from the date of sale of the com­mer­cial prop­erty. How­ever, if you do not want to in­vest in bonds then you will have to pay tax @ 20% on the in­dexed cap­i­tal gains.

Since there is no re­stric­tion to the num­ber of houses that one can own, you can in­vest in the third house if you are left with enough money af­ter pay­ing of your taxes or in­vest­ing in cap­i­tal gain bonds un­der Sec­tion 54 EC. So you can give this third res­i­den­tial prop­erty on leave and li­cense ba­sis. Can a son pur­chase a flat from his fa­ther/mother/wife or vice versa for an amount five times higher than the mar­ket price?

—Ra­jat Khanna First, the buyer will need to en­ter into an agree­ment with the seller that en­ti­tles him to pur­chase the prop­erty. Sec­ond, the buyer will have to pay stamp-duty and regis­tra­tion charges on such doc­u­ment based on agree­ment value which will be five times higher than the mar­ket value.

If the buyer is look­ing for a home loan, then the buyer will need to get a home loan sanc­tioned from the bank based on his fi­nan­cial pa­pers. The value of the sale trans­ac­tion be­tween the two par­ties shall be sub­ject to spe­cial scru­tiny. This is be­cause the lender may not be com­fort­able giving the loan, as the trans­ac­tion in ques­tion will be be­tween close rel­a­tives. Such trans­ac­tions are likely to be con­ceived as sham trans­ac­tions to raise money. The bor­rower will have to take the banker into con­fi­dence about the trans­ac­tion. To that ex­tent the choices will be limited. Also since in this case the trans­ac­tion is en­tered at five times the mar­ket value, you will not be able to get the loan on the ba­sis of the agree­ment value. I have a per­sonal loan with one of the banks. Can that be clubbed with a home loan as I can pay only one EMI at a time?.

—Ran­jit T Sarin No, be­cause the prod­ucts in ques­tion are dif­fer­ent. You can ask your home loan lender to give you a top-up loan on the se­cu­rity of the house and can pre­pay your per­sonal loan with it.

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