Can my wife sell our flat, invest in infra bonds in her name?
Premium- As per provisions of the I-T Act, the buyer is required to deduct tax at source (TDS) at the time of making payments if the total sales consideration exceeds ₹50 lakh
My wife bought a flat in 2003 with her savings. In 2011, when the property became freehold, my name was added in the registry. Now, we want to sell it but the buyer is insisting on splitting the sales proceeds of ₹40 lakh equally and issuing two different cheques in our names. My wife wants to invest the entire sales proceeds in infrastructure bonds in her name alone, after deducting capital gains. Is this possible? If so, what are the tax implications?
—Name withheld on request
We understand that the residential house property was purchased by your wife from her own funds in entirety and your name was added in the registry without any consideration being paid by you for the same. Thus, as per provisions of the Income-tax (I-T) Act, 1961, your wife shall be the deemed owner of the property while computing income under the head ‘Income from house property’.
Further, capital gain income from sale of such property shall be entirely taxable in the hands of your wife. Accordingly, capital gain income arising in your name from sale of such property will be clubbed with your wife’s income and will be taxable in her hands.
Since, the entire long-term capital gain (LTCG) from sale of property is required to be offered to tax in the hands of your wife, she alone will be entitled to claim deduction in respect of the amount of LTCG invested by her in the specified notified bonds (including infrastructure bonds). Accordingly, the amount invested in specified bonds within 6 months from the date of sale of house property shall be eligible to deduction (subject to a maximum of capital gains amount), subject to the prescribed conditions.
As per provisions of the I-T Act, the buyer is required to deduct tax at source (TDS) at the time of making payments if the total sales consideration exceeds ₹50 lakh. As the total sales consideration is less than ₹50 lakh, no TDS shall be done by the buyer. Hence, no TDS in this regard should reflect in the Form 26AS for you and your wife.
The sale of property should however reflect both in your and your wife’s Taxpayer Information Summary (TIS)/ Annual Information Statement (AIS), as available in your online income-tax accounts.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
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