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Capital gains tax on sale of an item recieved as a gift

28 August 2016

If a real estate unit is received as a gift from grandparents, and at a value of Rs. 50 lakhs, and is sold at 60 lakhs by the recipient of gift Will capital gains tax apply on the difference between gift received and selling price ? Or will capital gains tax apply between the original land value of 60-70 years ago ( About 25 thousand) , as paid by grandparents, and todays selling price ?

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8 Replies

Ashok Thammineni (Accountant) (34 Points)
Replied 28 August 2016

original land value and selling Price

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MADHVENDRA NARAYAN (ARTICLE / AUDIT ASSISTANT) (143 Points)
Replied 28 August 2016

section 56 (2)(VII)(b) any immovableproperty,-I. without consideration, the stamp duty value ofwhich exceeds Rs. 50,000/-, the stamp duty value ofsuch property is taxable,II. received for aconsideration which is less than the stamp duty value of the property and difference is more than Rs.50,000/- then such difference is taxable

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MADHVENDRA NARAYAN (ARTICLE / AUDIT ASSISTANT) (143 Points)
Replied 28 August 2016

However above section not apply in the case of immovable property gifted by parents or any member of family thus fair value on first of April 1989 or cost whichever is higher is taken as COA .

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MADHVENDRA NARAYAN (ARTICLE / AUDIT ASSISTANT) (143 Points)
Replied 28 August 2016

further read that if gift of immovable property received by real estate unit is considered as SIT thus no question of cap gain arise

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Pooja Roy (43 Points)
Replied 28 August 2016

Mr. Narain, Please elaborate

In this case, the gift (real estate, comprising of land and building) is recieved from grandparents

I now plan to sell it, and invest the proceeds in the stock market.

So what is SIT , can you explain.

I wnat to understand the capital gains applilcable before I decide whether to sell it, or to just keep it going on rent. So your reply would be most helpful

NITESH (JOB) (7 Points)
Replied 29 August 2016

In your case Cost of Purchase will be cost of purchase in the hands of your grandparents i.e Rs 25000. But you have option to take cost of purchase as fair market value prevailing as on 01-04-1981. FMV you can confirm from the registered office.

Also purchase price of property will be taken as per indexation. In short Indexation means your purchase value will be bring to present value for calculating capital gain.

Sale value will be Rs 60 Lacs

Purchase value will be Rs 25000 or FMV as on 01-04-1981 (indexation applies)

You will be required FAIR MARKET VALUE as on 01-04-1981 for calculating capital gain.

Hope this clarify your concern