In case the property was let out the rent received on the shop is also required to be included in your income for all those years
Q: My wife is owner of a shop for which full payment was made by me. She has now sold the shop after 5 years resulting into long term capital gains of Rs. 5 lakh. The proceeds of the shop have been deposited in our joint savings bank account. She is a homemaker and does not file her income tax returns. My question is whether she should file her IT return and pay income tax on the long term capital gains or whether I have to include this capital gains in my ITR and pay the tax.
Answer: As per the clubbing provisions of Section 64 any income arising from asset transferred to a spouse, without adequate consideration, has to be included in the income of the spouse who has made such gift. In your case the money paid by you for purchase of the shop is treated as gift made by you to your wife without adequate consideration. So the long term capital gains made on sale of this shop is required to be included in your income. Please note that you will be entitled to avail the benefits of indexation on this shop. You can also claim exemption under Section 54F by investing the sale proceeds in a residential house property or under Section 54EC by investing the indexed capital gains in capital gains bond of specified institutions like Rural electrification Corporation (REC) or National high way authority of India (NHAI) or Railway Finance Corporation etc.
Moreover, in case this shop was let out in the past the rent received on the shop in the past was also required to be included in your income for all those years. Since the ITR for the year ended 31st March 2021 would not have been filed yet at least include the rental income in your ITR for the year just ended.
Source: https://www.livemint.com/money/personal-finance/what-are-the-income-tax-rules-for-selling-a-property-bought-in-name-of-wife-11619246732634.html
