QUESTION: I am a housewife and will be getting my share about Rs.20 lakh on the sale of property left by my father. My son in the meantime has purchased a house in his name for Rs.16 lakh with bank loan for Rs.10 lakh and out of his own funds of Rs.6 lakh. Kindly advice me whether I can provide my son with Rs.10 lakh for repayment of the bank loan from the amount I have received from the sale of the property. The balance I can deposit in short-term capital gains fund account or purchase another property for Rs.10 lakh. What is the tax implication of the transaction?
ANSWER: On the sale of house property, there is deduction of the amount reinvested in another house property under Sec. 54, subject to the conditions thereunder. Such reinvestment has to be in the name of the assessee, who is liable for capital gains, as it is an expected requirement. The amount is advanced apparently as a gift by the reader to her son would not even otherwise qualify as reader's reinvestment and much less where the property exclusively belongs to the son. However, if the advance is made creating an interest for the reader in the property so acquired so that she becomes a co-owner, the claim can pass muster.