The property can be given to your father as a gift deed out of natural love and affection.
Registration costs on the gift deed would be levied.
Property gift deed to brother who was adopted by uncle
Sir, My father and his blood brother bought a plot of land in a Maharashtra town a few decades ago. However, the registry was done only in the name of my uncle. So he is the legal owner. Now my father wants to sell the plot and invest the amount in purchasing an apartment in near future. My uncle has no objection as there is good relation and understanding between them. But a small complication is that my father was adopted by his blood uncle (my grandfather's younger brother). So, on paper my father and uncle are cousins (chachere bhai). I am looking for an advice about what is the best way to transfer the proceeds from sale of the plot to my father with minimal taxation impact. Pls guide me. Thank you!
Asked 4 years ago in Property Law
Religion: Hindu
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15 Answers
Gift deed should be executed by uncle in favour of uncle
it should be duly stamped and registered
1. The brother gets stamp duty exemption.
2. The cousins are also considered in many states as full brother for the purpose of stamp duty assessment.
3. However in the gift deed there is no need to speak about the adoption and both of them can address each other as brother only which would not be false statement in strict sense.
The relationship of brothers between your father and uncle will remain despite your uncle being adopted
Your uncle no more remains a family member of his original family and upon adoption becomes member of his adoptive family
Except the aforesaid change, the relationship of brothers between your father and uncle will subsists as it is
So your uncle can transfer the property under a gift deed to your father and avail benefit of concessional stamp duty
Now your uncle is the owner of the property.
If he is selling the property that is his own decision and cannot be forced by your father.
Similarly your father cannot legally demand a share in the sale proceeds.
But since they both have good understanding and your uncle is ready and willing to transfer a share out of the sale proceeds to your father, he can do so by gift.
There is no gift tax payable nor income tax on the gift amount by either.
Gifts of any amount received from or given to any relatives - parents, spouse, your and your spouse's brothers and sisters, brothers and sisters of your parents and your and your spouse's lineal descendants are entirely tax-free.
However, you have to know another thing called ‘Clubbing’. There is a misconception that if you gift a certain amount to your spouse or minor child, then that amount is automatically exempt from taxation
Example of ‘Clubbing’
Suppose you have an annual income of Rs.10 lakhs. You gift Rs. 1 lakh from it to your wife, you cannot claim that your taxable income is Rs.9 lakhs. You have to pay taxes according to your tax slab on the entire Rs. 10 lakhs.
Now, the Rs.1 lakh gift amount is not considered as your wife’s taxable income. However, if your wife invests that money in, say, a Fixed Deposit (FD) in the bank, then the interest received from that FD will be considered taxable income, not of your wife, but, of you. This phenomenon is called ‘Clubbing’ and is the same if the amount is gifted to your child, who is a minor.
- If there is no dispute between them , then being the owner of the land , his blood brother can sell himself and transfer the amount in the account of your father.
- Since, both are blood related then his blood brother can execute a Gift deed in favour of your father , and can save the tax and also stamp duty.
Long term capital will levy which can be avoided by purchasing new property within 2 years of sale or under construction within 3 years. Or invest in govt. Bonds.
Uncle can sell the property directly and purchase new property in father name.
Tax will save.
See the gift would be the best possible way and the taxes on the same shall be applicable. Uncle can sell the property and he may transfer the proceeds to your father as a gift.
See on papers clear title is on your uncle name so to save the tax ask your uncle to make release or gift deed on your father name and than sell the plot or sale the plot and make money as gift to your father or from.that consideration purchase an apartment on your father's name in the way of gift deed.
If the gift deed is given by uncle to nephew is not taxable.
Relatives u/s 56(2)(vii) from whom Gift is permissible under Income Tax Act, 1961 (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of the individual; (iv) brother or sister of either of the parents of the individual; (v) any lineal ascendant or descendant of the individual; (vi) any lineal ascendant or descendant of the spouse of the individual; (vii) spouse of the person referred to in clauses (ii) to (vi)
There is only way to purchase the new property in cash in your father name. All other will attract capital gains
1. Your father can not officially claim share of his biological father after his getting adopted by his Uncle.
2. Your Uncle shall have to sell the property and gift 50% of the sale proceeds to your father for which no I.Tax will be required.
3. Your father shall have to take an affidavit from your Uncle affirming that he has gifted the said amount to your father to enable your father to satisfy the I.Tax department.
Gift Deed
1. Since the owner is your uncle he can execute a GPA in favour of your father to authorise him to sell the land.
2. Notwithstanding the validity of adoption, nothing prevents your uncle from authorising your father to sell the land.
3. The sale proceeds can also be taken by your father.
Execute gift deed in favour of your father.
1. Your uncle can execute a Gift deed in favour of your father then he can execute sales deed.
2. In both cases they need to pay capital gain tax but If your father sell the property and purchase new apartment in two years then he can get exemption from Long term capital gain tax.
