How is the sale of property by the parent taxed?

Name withheld on request

We assume that the land owned by your father is not agricultural land and you qualify as a head for tax purposes. Since the land held by your father is a long-term capital asset (since held for more than 24 months), any gain arising from its transfer will be taxable in the hands of your father (LTCG.

As per the Income Tax Act, a deduction can be claimed against LTCG arising from the sale of such land, as prescribed, if the net sale consideration for the purchase of residential house property (new property) in India by the assessee is is reinvested. Subject to fulfillment of prescribed time limits and other specified conditions. Deduction against LTCG can also be claimed by investing in specified assets like bonds, subject to prescribed conditions and limits.

To claim deduction from LTCG, the net sale consideration needs to be reinvested by the owner of the original asset. Therefore, your father can be eligible for this deduction only if the net sale consideration is reinvested by him in a residential house. If your father has gifted you the sale proceeds of the land instead of reinvesting the land, the above deduction may not be available to him. There are certain judicial precedents which support that it is not mandatory that such reinvestment in new property should be in the name of the original owner only for the purpose of this deduction, though it is not free from doubt. Note that any gift of money or property by the father is not taxable in the hands of the recipient.

My wife worked in a company for exactly 4 years and 10 months. Is he eligible for Gratuity? How can she prove her claim?

-Rohan

We understand that your wife is working with a company/establishment (not a seasonal establishment) to which the Payment of Gratuity Act, 1972, (POGA) is applicable.

Gratuity is payable to an employee on termination of employment (on retirement/retirement/resignation etc.) after rendering at least five years of continuous service (except in the case of death or disablement, where this condition does not apply).

Further, where an employee is not in continuous service for any period of one year, such employee shall be deemed to have been in continuous service for such period if the employee had actually worked under the said employer during the preceding 12 months Are :

1. A period of 190 days, if the establishment works for 5 days or less in a week;

2. In any other case a period of 240 days or more

Since your wife has worked for her employer for a continuous period of 4 years 10 months (i.e. more than 4 years and 240 days), she should be eligible for gratuity.

Parijad Sirwala is Partner and Head, Global Mobility Services, Tax, KPMG in India.