A taxpayer is usually eligible for IT benefits when he invests long term capital gains (LTCG) arising from sale of an old property to buy a new house. But what happens when the new property is not in his name and instead in the name of his spouse or children?
Delhi High Court of the view that is favourable to the tax payer. It says such person is eligible for IT benefits. However, the Mumbai bench of Income-Tax Appellate Tribunal (ITAT) thinks the tax payer should not enjoy the tax benefits under such circumstances.
According to Section 54 of the IT Act, a person can get tax benefit if there is a two-year gap between sale of the old house and buying a new one.
In a recent verdict, the Mumbai bench of ITAT had denied tax benefits to one R Gavankar because he chose to buy the new house in his wife and daughter’s names. However, Delhi High Court, in a similar case, pronounced its ruling favouring tax benefits to a taxpayer even if the legal title of the property was not in his name.
In India, not a lot of women have properties in their own name due to cultural and economic barriers. Some men, considered the head of the family, do make it a point to buy the house in their spouses or daughters' names in an attempt at helping them get economically secure.
Those taxpayers who are within the jurisdiction of the Bombay High Court must be careful to avoid tax litigation. If the taxpayer wishes to register a new house in the name of his or her spouse and children, it would be wiser to also add his or her own name to it. In such instance, at least a proportionate deduction (say, one third of the cost of the new house if registered jointly with names of a spouse and child) would be available to the taxpayer," Puneet Gupta, director of People Advisory Services at EY-India was quoted by Times of India as saying.