Rebate in cgt for gifted property

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Raj K (Querist)
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16 July 2014 Mr. A got a property through his father's will made in 1984. Further, a family settlement was executed in 1996 among Mr. A's family members in which the property was formally declared as Mr. A's property. Mr. A sold the property in FY 2014-15. Query : Can Mr. A get the benefit of cost indexation? Since it was an inherited property there was no cost incurred by Mr. A. Also, cost of acquisition is not available for the previous owner (Mr. A's father). Which year should be considered as the year of acquisition of the property for Mr. A

CA SUNIL K GARG

CA SUNIL K GARG (Expert)
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16 July 2014 SEC 49 AND 47 OF THE ACT, IN THE ABOVE CASE MR A WILL GET THE BENEFIT OF INDEXATION .
2. COST OF AQUISTION AND DATE OF AQUISITION THE PREVIOUS OWNER I.E FATHER WILL TAKEN FOR CALCULATING LTCG IN THE HANDS OF A.
3 IF FATHER HAS AQUIRED PROPERTY BEFORE 1981, THEN VALUE AS ON 1.4.1981 , WILL BE COST OF AQUISITION

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Raj K

Raj K (Querist)
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19 July 2014 Thank you so much Sir for your reply. Mr. A takes a long sigh of relief. Thank you.

I have another query. If Mr. A already has 3 properties in his name and then he sells one of them. Is he eligible to get CGT exemption if he invests in another residential house?

Raj K

Raj K (Querist)
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Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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20 July 2025 Query 1: Cost Inflation Index & Year of Acquisition for Inherited Property
When a property is inherited (including through will), the cost of acquisition for the beneficiary (Mr. A) is considered as the cost to the previous owner (the father).
Since the property was inherited via will in 1984, the date of acquisition is treated as the date when the father originally acquired the property. This is regardless of whether the actual cost is known or not.
If cost is not known, the cost as per fair market value as on April 1, 2001 (the date from which indexation is allowed) can be taken.
This means Mr. A can claim indexation benefit from the original acquisition date of the father (or from April 1, 2001 if cost unknown).
The family settlement in 1996 merely formalizes the ownership but doesn’t change the acquisition date for capital gains purposes.
Query 2: Exemption on Capital Gains on Sale of Property by Reinvestment
Under Section 54 of the Income Tax Act, an individual is eligible for exemption from long-term capital gains if the gains from the sale of a residential house are reinvested in purchasing or constructing another residential house.
The condition about number of properties owned before sale is not relevant for claiming exemption.
So, even if Mr. A already has 3 properties, he can claim exemption on the capital gains from selling one property if he reinvests in another residential house within the prescribed time limits.

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