Sold Residential Flat: Can You Gift Entire Proceedings To Close Relative Without Incurring Tax Liability?

Gift tax was abolished long ago and has been replaced by recipient-based tax where the recipient is liable to pay tax if the aggregate of gifts received, from all the sources, during the year exceeds Rs. 50,000. However, gifts received from specified relatives (son) are excluded from this provision and neither the donor nor the recipient has to pay any tax on the gifts. The income earned on investments made from such gifts will be taxable on your end. Please note, that you may need to provide proof of your son's ability to gift such large amounts. This can include his bank account details, salary slip, and income tax documents if he is subject to income tax in the country where he resides.

If you were to gift the flat to your daughter, there would be no tax liability either for you or her at the time of gifting it. But she will have to pay the capital gains tax as and when she sells the property. However, if you sell the flat and gift her the entire amount, you would still be liable to pay tax on long capital gains tax. You would only be able to gift the remaining amount after paying the taxes.

For computing the long-term capital gains, you need to find out the fair market value of the flat on 1st April 2001 which will be treated as your cost of acquisition and the difference between this and net sale proceeds will be treated as long-term capital gains on which tax at a flat rate of 12.50 per cent is payable, in case you do not avail any exemption.

You have to invest the difference between the net sale price and your cost of acquisition in a residential house and/or invest the capital gain amount in capital gain bonds of specified financial institutions like NHAI, PFC, RFC or REC for saving capital gains.

Since your net tax liability after adjusting tax deducted at source is less than Rs. 10,000, you need not pay any advance tax. If the tax liability exceeds Rs. 10,000, you are required to pay advance tax in four instalments- 15th June, 15th September, 15th December and 15th March. You can pay the advance tax on 15th March 2025. If the tax is paid before 31st March 2025, it will be treated as advance tax but if paid while filing ITR, it will be treated as self-assessment tax. Use Challan ITNS 280 for paying advance tax or self-assessment tax. Please choose the appropriate option while filing the form.