Capital Gains_Gift and sale thereafter

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When a property purchased in 2006 is gifted to sons without consideration, there's no immediate capital gains tax for the giver. If the sons sell the property within a year, it's treated as a long-term capital gain. The cost basis for the sons will be the original purchase cost of the previous owner, including any improvements made. Stamp duty on the gift or expenses related to rental agreements are not included in the cost of acquisition.

Dipen

Dipen (Querist)
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13 February 2025 Dear Experts,

Property purchased in 2006 by assessee is now trfd as gift to his 2 sons. Will this gift result in capital gains if trfd to 2 sons without consideration?

Also when the son sells the property within 1 year , then the same will be treated as short term or long term?

What will be the cost for him for calculating capital gains? zero or cost to previous owner? If cost to previous owner , then cost of improvements done will also be considered?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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13 February 2025 1. no tax on gift here.
2. the transaction would still be considered LTCG
3. cost of the previous owner including improvements, if any.

Dipen

Dipen (Querist)
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13 February 2025 Thanks for your advice!

Can we also claim indexation from the date of acquisition/improvement by previous owner?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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13 February 2025 everything available as normally it would apply if no gift was ever given.

Dipen

Dipen (Querist)
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18 February 2025 Can we consider below exp as part of cost of acq:

1 - Stamp duty paid on gift
2 - Stamp duty paid on lease agreements when property given on rent and legal expenses paid for the same?

Regards,

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 February 2025 no. neither of the two are included in costs.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 February 2025 refer to R.M. Arunachalam v. CIT [1997] 141 CTR (SC) 348 for similar issue resolved by Supreme Court.

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