Earnings tax rule on sale of home property acquired as alimony by a divorcee

What’s tax implication on sale of residential home property acquired as alimony for a divorcee? Can she save tax by reinvesting the cash?

Reply: The entire sale consideration acquired on sale of property acquired as alimony on divorce will not be handled as taxable revenue. What’s taxable is the capital beneficial properties made on sale of such property. For the aim of computing the capital beneficial properties within the instances the place the vendor himself or herself has not paid for it like in case of presents, inheritances, the quantity paid by the earlier proprietor or house owners is to be taken as the fee.

Whether or not such asset is to be handled as brief time period or long run relies on the mixed holding interval ranging from the date it was purchased for a consideration. In case the mixed holding interval is 24 months or extra the income are taxed as long run capital beneficial properties. It could be famous that in such instances although the fee and holding interval of the earlier proprietor is to be considered, you aren’t allowed to take the advantage of indexation from the date of buy by the unique purchaser if one goes strictly by the language used within the regulation and is offered from the date on which the donee will get to personal such asset. Nevertheless, a couple of of excessive courts have held that the advantage of indexation is offered from the date it was acquired for consideration.

You may declare revenue tax exemption underneath Part 54 on sale of the flat acquired as alimony if you happen to make investments the listed capital beneficial properties for buy or development of one other residential home property inside specified interval. Moreover and alternatively, you may make investments the capital beneficial properties in capital beneficial properties bonds of specified monetary establishments inside three years from date of sale of the residential property as much as 50 lakhs in a 12 months.

(Balwant Jain is a tax and funding skilled and may be reached on [email protected] and @jainbalwant on his twitter deal with)

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Up to date: 12 Jun 2023, 03:26 PM IST