Profit From Sale Of Assets Become Taxable In Year Of Transfer

I am selling my residential house property for which I have already received 90 per cent into my bank account. However, the possession of the property will be given to the buyer only after March 31, 2023. We intend to execute and register the agreement at the time of giving the possession. In which year will the long-term capital gains be taxable? 

Answer: The profits on sale of any capital assets generally become taxable in the year in which the assets are transferred. Transfer of an asset generally takes place when you execute a sale deed. In your case, just receipt of substantial portion of the sale consideration cannot be treated as transfer. 

It is only when you actually execute the transfer deed or hand over the possession of the house in part performance of the agreement that it is treated as transfer. 

Since the execution, registration of the agreement as well as handing over of possession will be done in the next financial year, your capital gains shall become taxable in the financial year 2023-24 and not during the current financial year, i.e., 2022-23.

My husband and I are both salaried employees. Can we both avail the tax benefits of principal repayment as well as interest if we take a joint home loan and buy an apartment which we will own jointly? If it is a self-occupied house, then can I also pay rent for another property in the same city and claim house rent allowance (HRA)? 

Answer: If both you and your husband are co-owners of the property, then both of you can get tax benefits for home loan repayments, including principal and interest in the ratio of your respective shares in the loan. Tax benefits will be available to each of you separately under Section 24 of the Income-tax Act, 1961 (interest payable on the loan), limited to Rs 2 lakh each if the property is self-occupied, and under Section 80C up to Rs 1.50 lakh (for the principal repaid) in accordance with the ratio of the loan. 

You can also claim exemption for HRA for actually paying rent to stay in a rented house not belonging to you. Which city the rented house is in will not make any difference as regards claiming the exemption. What is important is that you should be able to prove that you are actually paying the rent for the house that does not belong to you and which is occupied by you. However, in my opinion, it will be difficult for you to treat one self-owned house as self-occupied and claim another house taken on rent for self-occupation, unless it is genuine.

My late father did some investments in the form of post office and bank fixed deposits. What will be the tax treatment for the same? 

Answer: I understand that you want to know the tax implications of the assets inherited by you after the death of your father. Since there is no inheritance tax law in India, all inheritance, either under a Will or under the applicable personal laws, are fully exempt in the hands of the recipient, even if he/she is not a legal heir. However, the income earned on such investments till the date of death will be taxable in the hands of your father. You will have to file return of income as the legal representative till date of his death after registering with the income tax website. 

In case your father did not make a Will, all the assets will pass on to the legal heirs immediately on his death, and the income on such assets after his death will become taxable in the hands of the respective legal heirs. 

In case a will is prepared, it shall be taxable in the hands of the executors of estate of your father till all the assets are distributed according to the Will.

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)