Inherited Property

original cost of acquisition or FMV as on 1981 shall be taken and then indexation shall be applied.

1. Section 49 COA of previos owner shall be COA in the hands of successor. here in your case FMV as on 1.4.2001 shall be taken.
2. Forefeiture amount received by the successor before 1.4.04. shall be deducted from COA ( Section 51).
3. COI shall be improvements done by previous owner and successor after 1.4.01. ( Subject to case of R.M. Arunachalam (SC)).
4. Apply second proviso to section 48 i.e. Indexation.
5. Sale consoderation shall be the amout received or to be received by the successor ( Subject to provision of 50C).
6. Compute Capital Gains in accordance with section 48.
7. Take relevant deductions u/h Cap gain i.e. deduction u/s 54 to 54F.
8. It has been assumed that your asset is a capital asset u/s 2(14) and tranfer amout to transfer u/s 2(47) and does not fall u/s 47.
9. Nature of Capital gains shall be LTCG taxable @ 20% as per section 112 ( Subject to thershold ).
10. Period of holding of previous owner shall also be counted in the hands of successor as per section 2(42A) ( inspite of word 'It is first held by assesee' (as there are many decisions of Hon'ble courts).
Thanks.

Really good answer @ Anurag.

Thanks.