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Capital Gain on inherited property.

Mandar (Sr.Software Engg) (29 Points)

09 March 2010  

Hi All, please help.

I have following scenario and need to calculate the Capital Gain. Kindly help to workout the same.

1) Sept. 1993. : My father purchased a flat with consideration of Rs.185000/-   in Sept. 1993.

2) July-1997 : My father expired , leaving 4 of us behind (Me + My two brothers + My Mom).  For next twelve years no action was taken by us on that property. It was still in the name of my father till 2009.

3) Aug-2009 : My brothers and my mother released their rights through release deed. So I became sole owner of that flat.

4) Sept-2009: I sold the flat with consideration of Rs.2250000/-.

So please let me know if I am liable for Short term / Long Term capital gain. If yes please explain in details the ammount of tax to be paid my me. Also please suggest how this tax can be saved. Is this possible to avoid the tax by investing.


 7 Replies

Rajat Singhal CA,CS,CFA (Senior Manager (F&A)) (249 Points)
Replied 09 March 2010

Hello mandar,

In your case period of holding of the flat in your hand would be taken from 1993 instead of 2009.

So the capital gain taxable in your hand would be long term capital gain calculated as under :-

     Sale Consideration                          =                   2250000

less : expenditure on sale

less :  Indexed cost of acquisition

           (185000 X 632/244)                  =                    479180

                  LTCG                                                           17,70,820

You can invest this amount in any other residential house property, then there will be no tax.

Thanks & Regards

Rajat

1 Like

megha (Working ) (71 Points)
Replied 09 March 2010

 

Sec 49  of the Income Tax Act : Where the capital asset became the property of the assessee—

           (i)  on any distribution of assets on the total or partial partition of a Hindu undivided family;

          (ii)  under a gift or will;

         (iii)  (a)  by succession, inheritance or devolution93

                    (b)...........


 

the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be.  

 

 

So in your case , as the property has been inherited by you by your father and the share of your mother and brother has been released without any payment of consideration, then the cost would be cost incurred by your father and the period of holding of your father would also be considered in determining the period of holding of the assets for determination of short term or long term capital gain . As the inheritance of property is not considered as transfer u/s 47. 

Nothing contained in section 45 shall apply to the following transfers :—

(iii) any transfer of a capital asset under a gift43 or will or an irrevocable trust :

As the period of holding is more then 3 years, it will amount to long term capital gain

Cost of acquisition : 185000/- 

Indexed cost of acquisition : 1,85,000 * 632/ 244 = 4,79,180

Cost of improvement : nil in your case 

Capital Gain = Sale consideration -( indexed cost of acquisition + cost of improvement)

                     = 22,50,000- (4,79,180+nil )

                     = 17,70,820/-


You can claim the exemption under sec 54 from payment of capital gain  - by investing the amount of the capital gain in a residential house within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed. 


For further clarification on the matter as  regarding the lock in period of new property, how to disclose it in the return and etc   , do contact me on 

todi.megha @ gmail.com

1 Like

Mandar (Sr.Software Engg) (29 Points)
Replied 10 March 2010

Thanks a lot Mr.Rajat and  Ms.Megha for your prompt and precisice guidelines.

I really appreciate your efforts, and valuable suggestion.

However I missed to mention the expenditure details in this case.

Like I have spent more than,

 7 Lacs in repayment of personal loans and credit card dues.

Lost 6 lacs in shares(short term).

50 thousand on brokerage, and rest ammount on house hold purchases.

Now I have only 7 lacs left.

As i I can not buy any property in this ammount, what ammount I need to pay as capital gain on the ammount 17,70,820 /-

I know it is too late to ask, but please suggest how best I can manage the situation now.

Thanks,

Mandar

nikhil.r.gondhalekar (articled assistant) (64 Points)
Replied 10 March 2010

Hi Mandar,

You will be taxed @ 20% on capital gain amount.As per your ability & convinience u can also invest the amt in NHAI bonds for which refer NHAI site.u get 6.25% int p.a .within 6 mths of sale transaction u have 2 make investmentso u have very less time 2 invest .act fast.

-regards 

seema sharma (article) (24 Points)
Replied 07 March 2011

Follwoing is my querry. Request if you can answer the same.

Me and my brother inhereted an apartment after the death of my father in Jan'10. In Oct'10 we got it mutated in our joint name.
This flat is a cooperative housing society and my father had paid approx. Rs 13.03 lacs to the society towards cost of construction during the period 2001-2004. He got the possession in 2004.(the cost on account of land was given around 35 years back to the society and is negligible by todays inflationary rates). 
We both want to sell this. I have the following questions:

Is there any Income Tax on inheritance of this flat.

If we sell this, can we invest the proceeds only in Residential property to avoid capital gain tax on this. What if this is invested in a commercial place. How much is the capital gain tax on this sale transaction, if the proceeds are invested in commercial place.

Shweta (AM) (21 Points)
Replied 09 February 2012

My husband bought 2BHK flat in Hyderabad amounting 15lacs in 2007. Unfortunately he expired in 2009 and I was not able to sell the house as it was in my husband's name. It was suggested to get succession certificate from AP court to get the ownership of the flat. Legal heirs after his death was myself, daughter (8 yrs now) & his father (72 yrs nw). As we all have moved to Delhi now we want to sell the flat. Please suggest would I be taxed for the Capital gain in such situation? Market value of the flat is currently close to 25 lacs. Please suggest the best possible manner in which I can be saved from such tax.

gaurav (B.Com) (26 Points)
Replied 12 July 2015

Hi

My father purchased a land in the year 1981 for Rs 2.00 Lacs and he died in 2010. After my fathers death the property was mutated in my name via a registered Relinqushment Deed in which my brother my sister and my mother relinquished their shares in my favour. 
In 2014 i sold the land for 1.5 crores 

What will be be LTCG and how will the Indexation of cost inflation be calculated ??
will it be calculated from 1981 or 2010.

Also there was no consideration amount involved when i acquired the property.

Awaiting an early response

Thanks


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