First of all thanks to responding to so many queries of various investors. We really need you and this is acommendable job.
My father recently sold an inherited house which was constructed in 1976. My grandfather (expired in 2001) had an allotment letter for property but registry was not done for that property. After demise of my grandmother in 2011, as the WILL was in name of my father & his brother, his brother relinquished his right in favour of my father (as gift) and based on the release deed, property was registered at X value in my father's name. My father only paid, stamp duty to govt on that X price. Property was registered to avoid further complications of inheritance issues, ease of selling for buyer to avail loan, obtain clear legal title etc.My father sold that property in Jan'18 at 1.5 X price. My father is living in his own house and want to purchase second house out of the capital gains accrued on inherited property. Now we have below questions on LTCG:
- LTCG will be calculated on 2001 FMV or 2011 registered value and why ! One of the CA advised 2011 registered value and another CA at 2001 FMV, we are confused !
- Can he invest in purchase of second residential house out of above LTCG proceeds (s no. 1)
- What is the best possible alternative to invest LTCG in above Case.
2 Answers
Hi,
1 - In case of Gift or Inherited property, the cost of acquisition for the inheritor or receiver of the gift is NIL. But, for calculation of capital gain the cost to the previous owner (donor) is considered as the cost of acquisition of the Property.
The purchase year (year of allotment) was in 1976. As the year of acquisition was before FY 2001-02, the purchase price can be considered at ‘Fair market value (FMV)’ of that property as on 1st April, 2001, instead of cost of acquisition.
Kindly read :
https://www.relakhs.com/sale-gifted-property-capital-gains/
2 & 3 - Yes, he can use the entire Long Term Capital Gain proceeds on sale of a residential house to buy another house property (residential property) to save Capital Gains tax.
Kindly read :
https://www.relakhs.com/how-to-save-capital-gains-tax-on-sale-of-land-house-property/
Thanks for such a quick response. In your second article it is mentioned that in section 54 F, to get the LTCG exemption you should have only one residential house. In our case, as i mentioned in my query, he had two property…one he is living in and another was inherited….now he wants to invest LTCG proceeds for his second new residential house….you mentioned its possible but section 54 F says something else…am i interpreting it correctly.
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