Our house, owned by my father, got damaged in floods and the Insurance claim was settled as total damage of the house. Now my father has decided not to rebuilt the house. The house was built in 1970.
Is the insurance settlement amount subject to Capital gains or Income tax at the hands of my father?
Help would be appreciated.
Yes, it would be taxed u/s 45(1A) as long term capital gains (as the house was a capital asset) after reducing the indexed cost of acquision and improvement. You can take the FMV on 1/4/1981 as cost.
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