You don’t have to pay tax if your brother gifts a property to you

My brother and I are co-owners of a house in Faridabad, Haryana. This is an ancestral property bequeathed to us by our father. My brother wants to sell his portion of the house to me. What is the most tax-efficient way to do so? Is it true that one can avoid paying stamp duty by signing a relinquishment deed?

—Sanjeev Banot

From an income-tax perspective, generally, the sale or relinquishment of your brother’s share of property to you would be a transaction subject to capital gains taxation rules. However, if the understanding between your brother and you is that you will pay no consideration (in any form) in exchange, this transaction may be regarded as a gift by your brother to you.

When an individual receives an immovable property as gift from a specified relative, including brother, the transaction does not give rise to tax implications in either your or your relative’s hands.

Generally, sale, relinquishment, gift or transfer of an immovable property, by any other mode, can be effected by a registered gift deed along with payment of applicable stamp duty, depending on the state in which the property is situated. However, you should seek legal opinion on appropriate documentation and clarify any queries from the stamp duty perspective.

In your case, given the facts, the onus of proving that the transfer of flat is a gift or irrevocable transfer would be on you and your brother; there should be robust documentation to support the claim.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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