Example
Mr Santosh acquired a house property for Rs 3,00,000 during previous year 2001-02.He gifted such property to his friend Chitti Naidu on 16-07-2021 (Stamp Duty value on date of gifting Rs: 40,00,000).Chitti Naidu sells such property to Pratuysh on 16-02-2022 for Rs: 83,00,000. Discuss tax treatment.
In hands of Santosh
In hands of Santosh no tax is levied. Due to Santosh gifted to Chitti Naidu, gift is not treated as transfer, hence no capital gain inn hands of Santosh as per section 47 of Income Tax Act.
In hands of Chitti Naidu
He received immovable property without consideration and Stamp Duty Value is more than Rs:50,000. So, total stamp duty value of Rs: 40,00,000 shall be taxable under section 56(2)(x) in hands of Chitti Naidu for Assessment year 2022-23.
Capital Gain is applicable on transfer of Asset.
Computation of Capital Gain
| Particulars | Amount |
| Full Value of Consideration | 83,00,000 |
| Less: Transfer Expenses | – |
| Net Consideration | 83,00,000 |
| Cost Of Acquisition | 40,00,000 |
| Short Term Capital Gain | 43,00,000 |
Example-2
Suppose in Example:1, Santosh and Chitti Naidu are relatives (brother), then what will be the tax treatment?
Solution:
In hands of Santosh
Gift not treated as transfer and no capital gain is applicable due to Section 47.
In hands of Chitti Naidu
Section 56(2)(x) is not applicable, since asset is received from relative.
Capital Gain applicable for transfer of asset
| Particulars | Amount |
| Full Value of Consideration | 83,00,000 |
| Less: Transfer Expenses | – |
| Net Consideration | 83,00,000 |
| Indexed Cost Of Acquisition (3,00,000 X 317/100) | 9,51,000 |
| Long Term Capital Gain | 73,49,000 |
