A lower court has divorced me but my wife has put an appeal in High Court. So my divorce decree has been put on hold until the High Court decides the case. Now me and my wife do not wish the proceedings of court to go on and therefore want to go for mutual consent for divorce in the High Court. I don’t have the amount to give to her as one-time alimony so I have decided to give away a property standing in my mother’s name to my wife. I want to know if my mother can give the property which is in her name to my wife at the time of the divorce settlement in the high court. I also want to know whether my wife will have any tax implications now and when she sells that property.
Under normal circumstances when a mother-in-law makes a gift to the daughter-in-law, the income arising from such an asset is required in the hands of the parent-in-law who had made such a gift. I understand the house property which stands in your mother’s name will be transferred by your mother to your wife in consideration of your wife agreeing to the terms of mutual divorce. So there is no question of there being no consideration for this transfer. It is not necessary that the consideration should be between the same parties. It can even move from a third party.
The clubbing provisions apply as long as the relationship between mother-in-law and daughter-in-law subsists. Since in your case, the relationship of mother-in-law and daughter-in-law will get severed at the time of the final pronouncement of divorce, the question of clubbing does not arise anyway.
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Since the flat is being transferred for consideration, there is no tax liability for your wife in respect of receipt of such a flat. However, as and when your wife sells it, she will have to pay capital gains tax on the capital gains computed as per the provisions of income tax laws.
Please note that the full value will not become taxable as your wife will be able to take the cost of the property to your mother as her cost and compute the capital gains accordingly.
