How to solve the taxation problem on a property transfer deal?

One of my friend who is owning a flat, applied for another cooperative flat in the name of his brother in law, as the rules of the Cooperative Society, stipulates eligibility for applicants, who do not own any other property. Now on allottment of the flat in the name of his brother in law, they decided to avail home loan in the name of the allottee i.e. the brother in law and the monthly loan repayment will be made by my friend (to the loan of his brother-in-law). On repayment brother-in-law (allottee) will transfer the property in favour of my friend or his wife [i.e allotte's sister or the sister's husband( My friend ), who will repay the loan availed in his name]. Now, can anyone provide a guidance as to what will be the best way to transfer back the property to my friend to avoid cost as well as taxation burden? A detailed reply will be highly appreciated.

How to solve the taxation problem on a property transfer deal?

It look complicated to me. Repayment of housing loan will take many years. The complications are:

1) By that time so many things may happen and the brother-in-law's mind may change and he may not transfer the flat to his sister or to sisters husband.

2) The tax benefits on the house will go to brother-in law only.

3) The instruments paid by wife or husband will become loan given to brother-in-law.

4) To give the loan (for payment of installment), the wife or husband should have accounted money.

5) Finally, the wife or husband, who is going to give loan for repayment of installments should get the flat registered in their names through a registered sale deed.

This is my view. If I am in this position, I will not do this kind of transactions and take the risk of keeping the property in others name.

How to solve the taxation problem on a property transfer deal?

Oh the tangled webs we weave, when first we practice to deceive.

-- Sir Walter Scott

How to solve the taxation problem on a property transfer deal?

not a wise proposition. If not initiated aleady better drop the idea. All the points advised by the friend Mr.N.J.Redd are 100% correct. Besides. even if all goes well ultimately you should pay stamp duty and registration charges applicable to your state for getting the property transferred to the owner.

How to solve the taxation problem on a property transfer deal?

Law of Taxation has been enacted in order to curtail the tax evasion or avoidance from the revenue due to the exchequer.

Source of fund utilised to acquire the flat has an important part to be considered in this question. It is not simple as you think to transfer a title to somebody's favour since it requires specific rules for ensuring the ownership of the property genuine and eradicate binamy dealings.

Moreover, when your brother in law transfers his title on the flat purchased by you in his name, he is liable to pay the capital gains resulting from such a transfer. Normally, there will be capital gains in this transaction as you may have to pay the housing loan instalments by, say 10 years or 5 years.

This essentially bring about capital gains on the property transferred an he has to remit 20% of the capital gains as tax or he may have to resort for tax planning with respect to that capital gains.

How to solve the taxation problem on a property transfer deal?

this transaction is absurd. One could have got the property in the name of spouse and got it gifted back by way of gift deed by spending on least stamp duty. Now also this can be done but paying full stamp duty on the guidance value of the property simultaneously calling it a gift deed.