(Updated on 20-Sep-2023)
Capital asset typically refers to anything that you own for personal or investment purposes. It includes all kinds of property; movable or immovable, tangible or intangible, fixed or circulating.
Examples include a house, land, household furnishings, stocks, bonds or mutual funds held as investments etc.,
When you sell a capital asset, the difference between the purchase price of the asset and the amount you sell it for is a Capital Gain or a Capital Loss. Capital gains and losses are classified as long-term or short-term depending on the ‘holding period’. Taxes on capital gains are applicable.
For example : You buy a residential plot for Rs 5 lakh in 2000 and sell it for Rs 12 lakh in 2023 then you are making capital gains of Rs 7 lakh. You need to pay taxes on these capital gains.
Not all the times you buy / invest in capital assets like immovable properties. Sometimes you may inherit the properties from your parents / relatives, you may also get the properties through a WILL (or) you may be lucky enough to receive properties by way of Gifts. (Read : ‘Got a Gift? Know if it is taxable or tax-exempt?‘)
Property received on inheritance or through Gifts from family members are tax-exempt. At the same time, you (inheritor / Donee) are receiving them without any consideration. For example : Your father can gift you a house. Here, you are not paying anything to receive it.
Now, let’s say you would like to sell this gifted property for certain amount. In this case, your purchase price is NIL. Does this mean you do not have to pay any taxes on sale of gifted property? How are capital gains calculated in case of a Gifted property? What would be your Cost of acquisition (purchase price)? Are capital gains taxes applicable on sale property which is inherited? Is it possible to claim tax exemptions on capital gains on sale of gifted property? .. Let’s discuss..
Types of Capital Gains
If Land or house property is held for 24 months or less then that Asset is treated as Short Term Capital Asset. You, as an investor will make either Short Term Capital Gain (STCG) or Short Term Capital Loss (STCL) on that investment.
If Land or house property is held for more than 24 months then that Asset is treated as Long Term Capital Asset. You will make either Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL) on that investment.
(As per Budget 2017-18, Holding period for Long term capital gain for all immovable properties has been reduced to 2 years from 3 years. This is with effective from Financial year 2017-18 or Assessment year 2018-19.)
How to calculate Capital Gains on sale of Gifted property or inherited immovable property FY 2023-24?
Short Term Capital Gains on Gifted property is calculated as below:
STCG = (Total Sale Price) – (Cost of acquisition) – (expenses directly related to sale) – (cost of improvements).
Here, 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.
Short Term Capital Gains are included in your taxable income and taxed at applicable income tax slab rates.
Long Term Capital Gains Calculation;
The LTCG calculation is similar to STCG. The only differences are, you are allowed to deduct Indexed Cost of Acquisition/Indexed Cost of Improvements from the sale price and also claim certain exemptions to save tax on long term capital gains.
| Particulars | Amount | |
|---|---|---|
| Total Sale Price (Full value of consideration) | xxx | |
| Less | Expenses related to Sale / Transfer | xxx |
| Less | Indexed Cost of Purchase | xxx |
| Less | Indexed Cost of Improvement | xxx |
| Gross Long Term Capital Gains | xxx | |
| Less | Capital Gains Tax Exemptions under Section 54 series | xxx |
| Net Long Term Capital Gains on Sale of Gifted or Inherited Property | XXX |
Let us understand this with an example;
Mr Amitabh purchased a property on 1st Jan, 1989 for Rs 1 Cr. He then gifts the property to his son Mr Abhishek in 2022, however he decides to sell it for Rs 10 Cr in Sep, 2023. So, how are capital gains calculated on the gifted property?
Let’s understand this step by step ;
1) Type of Capital Gain
We need to identify the type of capital gains based on the holding period. The holding period of asset by Abhishek is around 1 year. Does this mean the gains can be categorized under STCG? – No.
Date of acquisition by donor (Amitabh) is considered as the Date of Purchase. So, kindly note that the date or year of inheritance / reeving the gift (2022) are of no importance in this calculation. Year of acquisition by previous owner (Amitabh) is 1989. So, the capital gains on sale of gifted property are treated as long term capital gains for Abhishek.
2)Â Date of Acquisition of Gifted or Inherited Property
We need to then know the cost of acquisition (purchase price). As Abhishek has got this as a gift, the purchase price for him (donee/receiver of gift) is ZERO. So, for calculation of capital gains, cost of acquisition borne by previous owner / donor (Amitabh) is treated as purchase price. In this case, it is Rs 1 Cr.
3) Indexed Cost of Purchase
For calculating long term capital gains, the seller of immovable property can claim indexed cost of acquisition.
Indexation is done by applying CII – Cost Inflation Index. This increases your cost base i.e., purchase price and lowers your gains. Your purchase price is adjusted for the impact of inflation.
How do you calculate the indexed cost of purchase/improvement? The indexed cost is calculated with the help of a table of cost inflation index. Divide the cost at which you purchased the Property by the index as on the date of the purchase. Multiply this by the index as on the date of sale.
Below is the Cost Inflation Index Table from 2001-02 to FY 2023-24 for your reference. Cost Inflation Index (CII) for FY 2023-24/ AY 2024-25 Notified by CBDT at 348.
The confusion would be, whether you can claim indexation from the year in which you received the gift or from the year of acquisition by donor? – As discussed above, the year in which you have received the gift is not used for calculation.
Let me explain to you what is indexation, its benefits and how it is calculated, by continuing with the above example…
The purchase year is 1989 and year of sale is in Financial Year 2023-24. The cost of acquisition in 1989 was Rs 1 cr. 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. (You can get the FMV details of a property from a Govt approved Property Valuer.)
So, the Indexed cost of purchase = (FMV / 100) * 348.
(Till Financial year 2016-17, the base year used to be FY 1981-82. To calculate the capital gains at the time of selling any property purchased before 1981, its purchase price is now calculated on the basis of the fair market value of 1981. Calculation at the fair market value of 2001 will increase the cost of acquisition and lower the capital gain.
W.e.f FY 2017-18, the base year for calculation of Indexation is going to be 2001-02. It will have an affect (mostly positive) on investments where indexation benefit is available when calculating Capital gain taxes.
For example: Suppose you are holding on to your investments made in debt funds or Property before 2001, the Fair Market Value (NAV) as on 1 st April, 2001 will be considered as cost of acquisition for calculating capital gains. This will help the investor to reduce the capital gains taxes.)
4) How to Save Capital Gan Tax on sale of an Inherited or Gifted Property?
You have a provision to claim certain exemptions on Gross LTCG on sale of inherited or gifted property. Below are the tax saving options on long term capital gains realized out of sale of gifted or inherited property;
| Section 54 | Section 54EC | Section 54F | |
| Who can claim the exemption? | Individual / HUF | Any person | Individual / HUF |
| Asset sold / transferred | Residential Property | Any long term capital asset | Land / Plot (other than Residential house) |
| Minimum Holding period of Original Asset | 2 years | 2 years | 2 years |
| New Asset to be acquired | One or Two Residential house(s) (Two houses if LTCG is less than Rs 2cr) | Notified Bonds | Residential house |
| Time limit for new investment | Purchase : 1 year backward (or) 2 year forward. Construction : 3 years forward. | within 6 months | Purchase : 1 year backward (or) 2 year forward. Construction : 3 years forward. |
| Exemption Amount | Investment in the new asset (upto Rs 10 cr) or capital gain, whichever is lower | Investment in the new asset or capital gain, whichever is lower (max Rs 50 Lakh) | (Long Term Capital Gain * Amount invested in new house of upto Rs 10cr) divided by Sale proceeds of original asset ie Net consideration |
Once you adjust the tax exemption (if any), can arrive at the ‘Net LTCG’. Long Term Capital Gains on sale of house or plot are taxed at 20%, with indexation benefit as explained above.
To sum it up, whenever certain assets are sold and particularly when such assets have been received by way of gift or through Will or by succession or by inheritance, then the cost of acquisition of the asset will be deemed to be the cost for which the previous owner of the property acquired it, as increased by the Cost Inflation Index of that year in which the previous owner originally acquired the property.
Continue reading :
- Property Gift Deed – All you wanted to know!
- Capital Gains Tax Exemption Options on Sale of House or Plot | AY 2024-25 Latest Rules
- What is an Ancestral Property? – Important Legal rules
- 5 ways of transferring your Immovable real-estate property!
- Latest Court Judgements on Women’s Property Rights
(Post first published on : 12-June-2017) (Image courtesy of Stuart Miles at FreeDigitalPhotos.net)
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Hello Sreekanth ,
Your
I seek a clarification on a calculation of LTCG . A flat purchased by my grandmother in July’2003 for Rs 3,65,000/-. It was gifted to me on 16th Sept’2022. I sold it on 8th Dec’2023 for Rs 18 lacs ( Market value assessed :- Rs 18,96,615/- by the Sub-Register of the Revenue deptt of the State Govt). I arrived at the Indexed cost of acquisition and LTCG calculation as follows: 396000 x 348/109 = Rs 12,64,294. There is no improvement cost incurred by me except Rs 8000/- spent on transfer-brokerage during the sale in Dec’2023. Hence my taxable portion of LTCG is : Rs6,24,321/-(1896615 less 1264294 less 8000) for the FY2023-24(AY2024-25). Pls confirm that it can be treated under LTCG and I can keep this Rs 6,24,321/- under CAPITAL GAINS ACCOUNT SCHEME in a PUB.SECTOR BANK ( as per Sec:54 of the IT Act ) and invest in a new flat within 2 yrs from 8th Dec’2023 . I understand , if I do not invest in house property within 3 yrs from 8th Dec’2023 then the amount will be taxable under Sec:45 of the IT Act. Pls guide me.
Regards,
Tapan Basu.
Dtd:- 23rd May’2024 .
Hello Sreekanth,
Thank you so much for this wonderful post.
Please let me know if I’m right in calculating LTCG like this :
My sister bought a piece of land (4000 sq. ft.) in 2008-09 for 18L.
She gifted me the same in FY 2023–24, and I sold a part of this land (2500 sq. ft.) for 25L.
So,
Purchase Value (2500 sq. ft.) = 11,25,000
Indexed purchase value = Purchase value * (CII for the year of sale/ CII for the year of purchase) = 1125000*(348/137) ~ 28.5L
Long term capital gain = Sale value – Indexed purchase value
LTCG =25-28.5= -3.5L
If it comes negative!
Does that mean I don’t have to pay any LTCG?
If Yes, then how do I calculate it?
Thank You Sreekanth.
Dear Awanish,
In your case, you are incurring Long Term capital Loss.
You can set-off the losses against LTCG from any other Capital Asset.
Sir, I want to sell the land gifted to me by my mother and use it for studying abroad. Will I have to pay taxes?
Dear Thomas,
Yes, the capital gains on such sale is subject to taxes.
Suggest you to go through the below article :
Capital Gains Tax Exemption Options on Sale of House or Plot | Latest Rules
Hi Sreekanth,
Thanks for the wonderful info through your detailed blogpost. I have query further to your post.
Say a father purchased a property in 1990 for 10 lakhs and then gifted the same to his son in 2020. Now the son sells the property for 50 lakhs. Lets say for ease of calculation LTCG is 40 Lakhs (although in reality would be lesser due to indexation). Now if the son purchases a property of 1 crore. In this case LTCG is lesser than the property price.
From 1 crore value of the new flat , son pays 40 lakhs from old flat sale and remaining 60 Lakhs either from his own savings or from a home loan.
So my query is :
1) Will the LTCG be exempt for him when he pays income tax
2) Will there be any LTCG on the remaining 60 Lakhs amount tht he pays additional to purchase the new flat?
Please advise .
Thanks in advance.
Sir
My chachi ( father’s brother wife) received a gifted property from her parents which is owned in 1989. And then within a month my chachi gifted this property to my father. After Few days My father sells this property to another person. Is this come under long term capital gain or short term capital gain??
Sir my chachi received a gifted property from her parents. In the same month she gifted to my father(brother in law). And another month my father sells this property. Is this long term capital gain or short term capital gain.
Dear Srikant
Kindly advise. My case is as below
1. Residential house with 2 houses gifted to me by father in 2012.
2. Acquired in 1981 by father.
3. I am holding for 8 Yrs now
4. 2019 I entered into JDA. 4 units to be constructed. 2 Units will be my share.
My queries
1. Should i pay LTCG if i keep both the units without selling? If yes
will guidance vakue or FMV of 2 units be considered as revenue?
2. If i sell 1 unit should i divide the indexed purchase cost to arrive at 1 unit capital gain or consider total indexed cost minus revenue of 1 unit?
3. When i sell 2nd unit at later date, how is capital gain computed?
Looking forward to your response asap.
Dear SGR,
CG related to JDA can be very tricky.
Suggest you to kindly consult a CA.
Thanks very much Sir for your quick response. Really appreciate your support.
Would you be fine to provide professional guidance if i approach you and help in return filing?. May i know your contact details. I am in Bangalore.
Dear SGR,
We do not provide one to one ITR filing service.
Also, I am currently based in AP.
I have a plot in my name which is purchased in the year 2012. Now I would like to dispose and buy a new plot jointly in my name and my son in law what are the implications
Dear Mohan ji,
If you sell your plot for profit then you realize long term capital gains.
As you are planning to re-invest in a vacant plot, you can not claim exemption on LTCG.
You need to pay tax on LTCG.
You may go through below articles :
* How to save Capital Gains Tax on Sale of Land / House Property?
* Checklist of Important Property Documents in India | Legal Checklist for Property Purchase
Sir recently my father’s brother gift registered land to my father which previously consisted of a house. my uncle held that house from 2002 and registered it to his other brothers in the earlier months of this year. Later in a very few days all 3 of them gave this land to a builder for constructing group house. Will this come to short term capital gain or long term capital gain. Please clarify
Dear soujanya,
As the sale has not happened there wont be any tax implications.
Did your father & uncles sell the land to builder?
Related article :
* Got a Gift? Find out, if it is Taxable or Tax-free?
*How to save Capital Gains Tax on Sale of Land / House Property?
No sir
They made an agreement for constructing the building and what ever he earns or constructs will be shared on a 50 – 50 basis.
Dear soujanya,
In that case for your father/uncles, it is a Long term capital gains (if they sell the constructed Flats/houses allotted to them).
Suggest to consult a CA in this regard..
Actually they are planning to sell sir
One of my father’s friend told him that this becomes a short term capital and he has to pay the tax along with his tax on the salary.
When we try to sell the flat will it become stcg or ltcg sir?
Dear Soujanya,
It depends on the clauses written in the Joint Venture Agreement.
I believe its LTCG. As suggested, kindly consult a CA.
Dear Sreekanth,
This article was extremely useful to me – thanks very much for posting it. Everything is very clearly explained and I have understood the method of calculating capital gains tax.
Only one question remains – about fair market value. I received a flat as gift from my father in July 2017. He had bought it in 1968 for an amount which I cannot trace, but definitely not more than 2-3 lakhs. Now I am selling it for Rs.3 crores in Nov 2019.
As per your article, the holding period is from 1968 to 2019, so it is long term. The cost of acquisition will be the FMV as on 01 April 2001. This is where I am stuck – how can I find that without going to a valuer? The property is in Mumbai, so can I take the ready reckoner value of April 2001 as the FMV? And then apply indexation on it (today’s CII is 289).
Would greatly appreciate your clarification and advice. Thanks in advance!
Dear Jaykayess,
Yes, you can go by the ready reckoner, but advisable to also check with an authorized property valuer.
Related article : How to save Capital Gains Tax on Sale of Land / House Property?
Thanks again, Sreekanth, I will do so.
Sir,My mother have gifted her self earned property to my sister in 2014 through an registered gift deed.. Now my sister has found a buyer,My question to u is the purchaser now wants my mother (donor) and my sister’s husband and her adult son to be an consent witness while executing the sale deed….1) please tell me is it mandatory for these people to be consent witnesses..2) tell me is there an other options to execute the sale deed..3) Do my sister has absolute right to sell her gifted property without taking the above said consent witnesses..
Dear Vijay,
1 & 2 – It is not mandatory but the Seller may be trying to be ‘extra cautious’.
3 – Yes she has absolute right.
Related article : How to save Capital Gains Tax on Sale of Land / House Property?
Hi Sreekanth my case is kind of similar to the example you have mentioned. I would like to sell a house that i have received as gift. Holding period is less than 2 years. Am unsure if it is STCG or LTCG.
My understanding is that this issue has been subject to litigation. Do you have any recent case law etc supporting your conclusion ?
“Date of acquisition by donor (Amitabh) is considered as the Date of Purchase. So, kindly note that the date or year of inheritance / reeving the gift (2016) are of no importance in this calculation. Year of acquisition by previous owner (Amitabh) is 1989. So, the capital gains on sale of gifted property are treated as long term capital gains for Abhishek.”
Thanks
Dear Ani,
When did the original owner (donar) acquire the property?
The matter that is mostly subject to conflicting Court orders is ‘Allotment date Vs Registration Date/Possession date’ for an under-construction property.
Hi Sreekanth….the house was purchased jointly (donor was 1/3 owner) in Oct 2000. Donor became sole owner when other joint owners relinquished their rights in Dec 2013…
The reason i mentioned this aspect being subject to litigation was based on this article:
Moneycontrol.com
Dear Ani,
In the mentioned article, kindly go through the last paragraph again :’
“In view of the findings of the Honourable judges in the above case one can definitely come to a conclusion that whenever certain assets are sold and particularly when such assets have been received by way of gift or through Will or by succession or by inheritance, then the cost of acquisition of the asset will be deemed to be the cost for which the previous owner of the property acquired it as increased by the Cost Inflation Index of that year in which the previous owner originally acquired the property.”
Hence, in your case, the gains (if any) will be considered as Long Term Capital Gains.
Related article : How to save Capital Gain Tax on sale of Property?
Dear Sreekant,
My Grandmother and Mother jointly held a residential property bought in 1990 for 2.8 Lacs which they gifted to my brother in 2015 and he is planning to sell the same now. Would there be any capital gains tax for the same or is it exempt in the case of a gifted property?
Dear Pranav,
When you brother received Gift, that transaction is a tax-free one.
But, Long term capital gains (if any) realized by your brother now will be subject to taxes.
Related article :
* Got a Gift? Find out, if it is Taxable or Tax-free?
* How to save Capital Gains Tax on Sale of Land / House Property?
My wife has inherited 30 cents of land in 2008.This property was gifted to her by her mother,who had also inherited it from her mother(wife’s grandmother) Now she is selling ten cents from it at 20 lakhs.How to calculate capital gain tax,please advise.
Dear Dileep,
As the year of acquisition was before FY 2001-02, the purchase price (for 10 cents) can be considered at ‘Fair market value (FMV)’ of that property as on 1st April, 2001, instead of cost of acquisition by the original owner.
Related article :
How to save Capital Gains Tax on Sale of Land / House Property?
My father had bought commercial shop property in mumbai in 1968( whose sale deed and property card not there with him or not made not aware ). Although property tax electricity ,water bill in dad name. In 2000, my father through will made myself and one brother owner of shop. In 2008 my father died. Now myself and brother wants to sell property what document do we require to sell property ( as sale deed ,property card document not there)
Dear Rahul,
You may kindly visit the concerned Sub-Registrar Office and apply for a True certified copy of Sale Deed & also get latest EC.
Based on the WILL, copy of Sale deed, EC, death certificate, Family tree document etc you can Sell the property. (I am assuming this is not an Ancestral property).
You may also try to get the Property Mutation done on to your names at local Civic body office (Corporation..)
Kindly read :
* Lost your Property Documents? How to apply for Certified Copy of lost Sale Deed?
* Importance of EC
* What is Mutation of Property? How to apply for Mutation of Property?
* What is Ancestral Property? | Definition & Important Legal rules
Sir,I would like to sale my house which is given my family members ( mother, brothers & sisters) after the death of my father for Rs.3 Lakhs in the year 2000. Is this will comes under inherited? What will be the tax liability on sale of this property? I am salaried in a pvt ltd company and filing my IT return regularly. please guide me how to i act. Thanks.
Dear ANISH,
Did they execute any Document like Gift Deed or Relinquishment or Settlement Deed? Under whose name was the property previously held?
Dear Sreekanth,
In 1974, my father bought some land from his nephew and he was also gifted some additional contiguous land by his mother so that a house could be built. My father passed away in 2010 and as per his will , all his assets were passed on to my mother, including the house . Now my mother wants to gift a portion of that land to me. Once that is done, if I have to sell the land gifted to me, immediately, how do I calculate Capital Gains?
Dear Venugopal,
Date of acquisition by original donor is considered as the Date of Purchase. So, kindly note that the date or year of inheritance / receiving the gift are of no importance in Capital Gains calculation.
As the acquisition date (for donors) 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.
Suggest you to kindly consult a CA.
Related article :
How to save Capital Gains Tax on Sale of Land / House Property?
My son purchased a property in Oct 2017 wherein i gifted an amount of Rs 45 lacs. The property is registered in his name. In sept 2018 I sold a property and have capital gain of Rs 45 Lacs which i need to either pay tax on or invest in a new property> I have already utilized bond upto 50 lacs. My question is if today my son transfer 50% share to my name in the property which he purchased as i had given him 45 lacs gift, can i reflect this amount to claim exemption in LTCG.
Dear RAJESH,
I have already utilized bond upto 50 lacs – But you have only Rs 45 lakh as LTCG and you have already invested in Bonds ????
Gifting may not be eligible for tax exemption. You may kindly consult a CA as well.
Related article : How to save Capital Gains Tax on Sale of Land / House Property?
Sir, need to ask one thing.
My cousin stays abroad and was nri in 2008 when he bought the flat in karnataka. Now he got london citizenship and is not even having an Indian Pan card.
Now he plan to sell the flat.
How much TDS needs to be paid. I heard its 20%+ taxes =total 23.6%
Can he gift it to his dad who is indian citizen and have Pan card also.
Anyways that only 1% Tds is deducted.
Thanks in advance.
Dear Jatin,
As per FEMA rules on acquisition and transfer of immovable property, an NRI can transfer an immovable property (even by way of a gift) to a person resident in India.
Also, from an income tax perspective, if the relationship is that of father – son , the clubbing of income provisions in case of Income Tax will not be applicable. The cost of acquisition of property for your Uncle will be the cost of acquisition for your Cousin.
Kindly consult a good civil lawyer/CA.
Related article : Got a Gift? Find out, if it is Taxable or Tax-free?
I bought a Apartment recently jointly with my wife. Have taken a joint home loan for that. I am staying in new apartment bought for self use. I have another house in my sole name ( Inherited land from father on which house construction done by me 10 years back) which is let out and rent I am declaring in my ITR. My query is I have a plot of mine bought 12 yrs back. If I sell that can I utilize Capital Gains entirely to repay my Home loan to reduce Home loan. Now as it’s not my only home I read that benefits of Sec 54 not applicable. In that case can I gift my site to my wife and then she uses proceeds to prepay loan. This is what my CA advises. I am aware it can be done only within 1 year of buying new house. Please guide
Dear Sudheer,
If you have bought the house 1 year back from the date of proposed sale of plot then you can claim the exemption.
However, you should not own more than one residential house prior to this investment to claim exemption u/s 54F.
I believe that your CA’s is a good one.
But, in case, you receive a scrutiny notice, you/your CA may have to justify…
Related articles :
* How to save Capital Gains Tax on Sale of Land / House Property?
* Long Term Capital Gain Exemptions on Sale of Property & Recent Court Judgments
Dear Sreekanth, I am delighted to go through this site. found very informative and to the point.
My wife died intestate leaving few house sites in her name, that were bought in the period from 1994 to 2011..I and my two sons are her legal heirs. Ultimately I/we will be disposing of those plots.My sons would like to relinquish/gift their portions through a deed ,so that I may inherit the plots entirely. I am in the high income bracket. If I sell these plots at a later date say with in a year of relinquishment by my sons, what will be the tax implications ? be As I will be selling with in a year after their relinquishment/gift of their inherited portions will it be STCG OR as these plots were bought many years earlier (by my wife) and 1/3 portion was inherited directly and 2/3 portion was obtained as gifts/relinquishments prior to disposal will it be LTCG?
The other route is that each of us inherit their 1/3 portions individually by patta transfer with death certificate and Legal heir Certificate initially for each and every house site and and sell them plot wise. Tax implications will be different for each one of us.
Will you please guide us, so as to minimize the tax outflow and the relative merits and demerits of the options available?
Thanx in advance
Dear Ganapathy ji,
In this case, it is LTCG only.
Kindly note that for calculation of capital gains, cost of acquisition borne by previous owner / donor (your wife) is treated as purchase price, for you or for your sons (whether it is after relinquishment or a direct sell by three of you).
In case, three of you sell your respective shares in the properties, all of you have to bear the taxes on LTCG (if any).
If 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 original cost of acquisition, this can reduce your net LTCG. You can also claim any indexed cost of improvements done to maintain these properties.
Suggest you to kindly go through these articles @
How to save Capital Gains Tax on Sale of Land / House Property?
Long Term Capital Gain Exemptions on Sale of Property & Recent Court Judgments
Nominee Vs Legal Heir : Who will inherit (or) own your Assets? | Importance of WILL
Advisable to consult a CA in this matter!
Thank a lot dear
Dear sreekanth
Thanks for this article. I have a query. My grandfather had got a property from his father and he doesn’t know on what cost his father would have purchased the property. So what cost of property we should take for ltcg calculation. Secondly we also don’t have details of cost of improvement he did on this property. It’s a more then 100years old property. Please advise. Thanks
Dear Archana,
If 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 original cost of acquisition.
Plz provide
Section and strong case law under which this FMV concept applied..
In my case i got immovable property gift from my father in 2010, the same property my father also got gift from my grandfather in 1995, and my granfather also got such property in 1925..
We do not know the value.
Now i sold property in 2016.
On point of IT officer the cost of such peroperty is zero.
As he state that my previous owner also got such property in gift so cost for him is also zero..
We when get property as gift in 2010 does government value as per 1981 and apply cost index on such govt approval value..and calculate tax and paid ltcg
But officer not agree
Pls provide case for this type of situation
Dear Sandesh,
Did you get any Scrutiny notice now from the IT dept?
Till Financial year 2016-17, the base year used to be FY 1981-82.
So, if you have sold the property in FY 2016-17, I believe that you can take the FMV of property as of 1981.
You may kindly consult a CA as well!
Dear Sreekanth,
My uncle purchased land on Oct 1977 for the value of Rs. 2000 area 266 sq. yards, and he gifted her daughter on Nov 2006 (value of during gift: Rs.6,35000), after gift, daughter invested in the property Rs. 10,000,00, now planning to sell the property aprox. Rs. 95,00,000, how much tax we can pay at present? It will be appreciated if you will give some aprx. value
The location of property will be Chandanagar near BHEL, Hyderabad
Regards
Pavan Reddy
gifted only part of the property around 110Sq yards
Dear Pavan .. Suggest you to kindly consult a CA for tax calculations.
The purchase price for donee/receiver of gift is ZERO. So, for calculation of capital gains, cost of acquisition borne by previous owner / donor (Uncle) is treated as purchase price. Cost of acquisition can be taken as Fair market value of land as in 2001 instead of price as in 1977.
You can also show indexed cost of improvement for Rs 10 Lakh.
My father has agriculture land in ALigarh district in Uttar pradesh. Most of the this agriculture land gifted my grand father and some parts my father purchased own. SO i just want to know that if my father sell this property then is it taxable? or if it is taxable then what we can do for exempted.
Dear AKhilesh,
Kindly read : Agricultural land & tax implications
Myself and my wife joint names purchased a property in 2001 at 6 lakhs. Subsequently we constructed first floor In 2013-14 at 16 lakh. I relinquished my rights in April 16 thro’ a registered release deed. Now, before 31st march 2018 she wants to sell the house at 50L. My query is whether it attracts capital gains tax. How much tax it attracts or this amount can be invested on bond or this can be invested on another property as she has already a flat in her name. Thank you.
Dear srinivas,
This is a tricky one! Ideally, you could have executed Gift deed, in such case, the entire transaction can be subject to Long term capital gains only.
In case of Release deed, the tax on capital gains (like in Sale Deed case) is applicable but only on the portion of the property that you relinquish. This can be STCG.
Was the release deed done for any consideration?
Suggest you to kindly consult a CA in this matter..
Dear Sreekanth, this article has opened by eyes to some new knowledge that I wasnt aware of: “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. (You can get the FMV details of a property from a Govt approved Property Valuer.)”
My parents had built their house in 1986, and we sold it in 2017. Until now I was thinking that we just need to multiply the cost of acquisition with 2.72 to arrive at the indexed cost, and it was hardly any value at all. Now that I read that I need to ascertain the FMV of the property in 2001, I have a fresh lease of life.
Can you refer any govt approved property valuer for me please? I’ll be very grateful.
Dear Sandeep,
Higher the cost of acquisition, lower would be your net capital gains and hence lower would be your tax liability (if any).
You may have to find a Surveyor in your locality. You may check with any trusted civil lawyer/CA/Real estate agent for references (or) through Google!
can we claim cost of stamp duty & registration fee as cost of acquisition in case of gifted property when we sell that property.
Dear Pritam,
As far as I know, it can be claimed as part of Cost of acquisition.
Hi,
This is Abhijit
Query is
I have a property (Flat) in Maharashtra which I want to gift to my Monther. I am living abroad since last 5 years and do not file tax returns in India.
6 years have got completed after purchase of this property & Mother will not be selling this property for long term and after her it will come again back to me.
1. Will this attract any capital gain tax.
I feel not as there will be no financial benefit out of this deed.
2. After mother when this gets transferred to me 100 % or partial as per mothers will or by default. Will it attract any tax.
3. If I want to sell this property after my mother if this will attract any tax, if yes on what price.
Thanks in advance for your reply
Dear Abhijit,
1 – No.
2 – No.
3 – Yes. The purchase price (cost of acquisition) in this scenario would be, your original purchase price (6 years back price, given in your registered Sale Deed).
Related articles ;
Gifts & tax implications!
Nominee Vs Legal heirs
Dear Sir
I have one query related to same
Hi My Question is
1. My Grandfather bought property in 1954, built a home on it.
2. He willed this property to my cousin, and died in 2004, so my cousin inherited this property.
3. My cousin gifted me this property in Nov 2016. i paid stamp duty as it was not blood relation (valuation was 24 lakhs).
4. I sold this property in 2017 for 24 lakhs.
My question is
a. As it was gifted to me and i paid stamp duty do i need to pay tax on it.
b. I sold property on same rate on which i gift deed was made, i.e. 24 lakhs. Will i incur any capital gains. will it be STCG or LTCG
Dear mayank,
1 – Tax on capital gains received on sale of property is applicable in case of Gifted or inherited properties too.
2 – In your case, it can be LTCL / LTCG, If the purchase price with indexation is more than the sale price then you may be making capital loss, else capital gains.
For calculation of capital gain the cost to the previous owner (donor ie your grand father) is considered as the cost of acquisition of the Property.
Thanks, also i need to pay tax as its Gift deed without blood relations
Dear Mayank..Yes, you are correct.
Kindly read : Gifts & Tax implications.
Suggest you to kindly consult a CA.
My father died and my mother is with us. We are two brothers. My brother has a daughter, and I have two sons.
With the consent of my mother me and my brother wish to sell a ancestors house property which was 100 yrs old built by my grand father, and house plot purchased by our father in 1969 for Rs. 2000/-.
So far we have not divided the property.
If the house is sold, my mother says that the money can be passed on to her grand children. Ie. My brother’s share to his daughter and that of mine to my two sons.
As regards to plot, we decided to share between mother, me and my brother..
This also me and brother want to give to our children. My mother may gift her money later to children.
Please educate us on tax implications on the sale of these properties.
I am a pensioner and tax payer. My brother also retired and his income is under tax limits. My mother 85 yrs) gets my father’s family pension, but with in the tax limits
Dear Ravindranath ji.. Kindly refer to our discussion on Forum ..
Dear Srikanth,
Appreciate your blog regarding on the tax implications which is very useful for readers.
I have on one query,
My parents have one house property in their name and I got one gifted house property on April 2017 from my mother where it was gifted by my father last year June 2016.I am staying with my parents now,where the gifted property was locked not rented to anybody as of now from gifted date.I would like to know whether i need to declare this as rented house property and also mention as gifted property in upcoming it returns…
Dear Srinivasan,
If you have plans to let it out then you can declare it as let out property kept vacant for entire year (if kept vacant for full year) ..it depends on your plan.
Are you a salaried person? Are you claiming HRA?
You can disclose the value of Gift (property) in the ITR under ‘exempt income’ section.
Kindly read :
Gifts & tax implications
Sale of inherited or gifted property & tax implications
Yes I am salaried person (unmarried) living in my parents own house and holding only the gifted property in my name. Also I am not claiming any HRA…but if we keep vacant do I need to declare any unrealized rental income….
Dear Srinivasan ..You can declare it as let out property kept vacant and in this case ‘rental income’ would be nil.
Kindly read : Income from house property & tax implications..
I am writing this as no comment field is there in “Got a Gift? Find out, if it is Taxable or Tax-free?: “.
My question is if an assessee receive gift in from of bank transfer by cheque or NEFT from relative (as per IT act, 1961), Do we still need gift deed or not. Here, Tax practicing person keep on asking for gift deed.
Can i make declaration on simple white paper as gift deed. (just for evidence as both are relative say brothers)
Dear Dixit ..It is not mandatory to make a gift deed, but advisable to have it..
Hi Sreekanth,
I have a query regarding the cost of acquisition for the sale of gifted property.
As the person receiving the gift is also paying stamp duty and registration charges for the gifted property, can this amount (stamp duty plus registration) also be added to the cost of acquisition? If so, can this amount also be indexed (from the year of gift to the year of sale)?
Thanks.
Dear Avanish,
Very good question!
I believe that there is no clarity on this!
As far as I know, it can be claimed as part of Cost of acquisition.
Can I buy 2 houses after selling one house and still get tax exemption.
Dear Mr Rao,
Kindly note that you are allowed to purchase or construct only one new asset from the capital gain that accrues. This means that you cannot make multiple property acquisitions and thus seek to reduce your tax outgo. However, if you sell more than one property, you can invest the resulting cumulative capital gain amount in a single new property.
Kindly read : How to save Capital Gains tax on sale of Property?
Sir
My query is i have purchased an flat in pune and am residing there and the same is self occupied by me. In the month of March 2017 my father gifted me his property which is again an residential property in Bangalore which is occupied by my parents. Now i intend to sell the property in Bangalore and purchase an new flat as well. Will i be able to claim exemption for the same as i was told if i already have an residential property i shall not be entitle for the exemption. Please clarify regarding the same.
Thanks
Dear Mr. JOSHI ..Suggest you to kindly go through this article, and revert to me if you need any more details..
Very nice post. Really helpful
Hello Srikanth,
I have a question around income from house property tax planning. I have found the relevant article (https://goo.gl/9ncybf) however I couldn’t get the option to post the comments. Hence posting my question against this article. Please help.
I have two flats on my name, For the 1st one home loan is closed and which is self-occupied where I am staying with my spouse and parents. 2nd flat is on rent for which SBI Maxgain home loan is going on. Since last year I am unable to take the tax benefit 2nd flat home loan as much as I wanted because the yearly rent I receive is more than the home-loan interest(even after deducting Municipal taxes and std. deductions from rent). Hence my income from house property is coming as +ve. I have parked my surplus money (50% of the outstanding loan amount) in my SBI Maxgain loan account which I have kept as contingency fund, or for any new investments and to also reduces the interest out go from monthly EMI. What options I have to save/avoid tax on rental income in this case?? Can I show the 2nd Flat as Self-Occupied and take the benefit of Home Loan Interest component? and transfer 1st flat on my spouse name (who doesn’t have any other source of income) paying agreement cost, society charges etc.? Please advise what is feasible and beneficial in this case.
Dear Hanumanth,
For time-being, we have de-activated blog comment feature on posts which are older than 365 days.
Whether it is a self-occupied or let-out, the maximum tax benefit that one can now claim is Rs 2 Lakh only under the head ‘income from house property’.
I am unable to understand your logic.
If your tenants in second property are paying you rental income (if by non-cash mode) and if they in-turn are claiming their HRAs, then kindly declare it as let-out only.
Thanks Sreekanth for responding. I am showing my 2nd property as let-out and adding the rental income to my income from house property, my logic was to transfer the 2nd property to my spouse or parent name so that the rental income will go to her and would be still under tax exemption limit. Is that a good idea? Will this attract any capital gain tax implications? Thanks.
Dear Hanumanth,
If you gift the property to your spouse, as per clubbing of income provisions, the rental income would still be added to your income and taxable.
Clubbing of income is not applicable if you gift the property to your parents.
Kindly read :
Gifts & tax implications.
5 ways of transferring your real estate property!
Thanks a lot Shrikanth. My all questions are answered now and I have realized that there is no way I can save tax to be paid on the rental income of 2nd property. Thanks for your help and shared link around this.
Sreekanth,
Kudos to your work..Keep it up!
I have a doubt. I have an inherited share from my Fathers property. Should I purchase a Residential Property or can I Purchase a land on the share I have received.
I don’t intend to construct a house on that land I purchase, its just for investment. Could you clarify.
Dear Ajith,
If you invest in only Vacant land then no Tax exemption is available.
Kindly read : How to save tax on LTCG on sale of property?