Is Capital Gain exemption available for Property acquired by Giftdeed

A complex scenario involving gifted properties and capital gain tax exemptions! Key Points 1. *Mother gifts property to Son*: The son is not liable to pay capital gain tax at this stage, as there is no sale consideration. 2. *Son gifts 90% share to his wife*: This is considered a transfer, but since it's a gift between spouses, there is no capital gain tax implication. 3. *Sale of property*: When the property is sold, the capital gain tax exemption rules will apply. Capital Gain Tax Exemption To qualify for capital gain tax exemption, the following conditions must be met: 1. *Reinvestment in a new residential property*: The entire sale proceeds must be reinvested in a new residential property within 2 years from the date of sale. 2. *Investment in Tax Bonds*: Alternatively, the capital gain can be invested in specified tax bonds (e.g., NHAI, REC) within 6 months from the date of sale. Gifted Property Considerations Since the property was initially gifted by the mother to the son, the son's cost of acquisition will be considered as the cost of acquisition of the mother (i.e., the original purchase price). Tax Implications When the property is sold, the capital gain will be calculated based on the sale price and the indexed cost of acquisition (i.e., the original purchase price adjusted for inflation). The entire capital gain will be taxable, but the exemption rules mentioned above can be applied to reduce or eliminate the tax liability. Conclusion To summarize: - The son's cost of acquisition will be considered as the cost of acquisition of the mother. - The entire capital gain will be taxable, but exemption rules can be applied. - Reinvestment in a new residential property or investment in tax bonds can provide exemption from capital gain tax. It is recommended to consult a tax professional or chartered accountant to ensure accurate calculations and compliance with tax regulations.

Re investment is applicable.

Thanks for reply.

Means if i reinvest the  a part amount of capital gain of gift deed aquired property then that amount won't atttract any tax while rest uninvested amount would require capital gain tax payment.

for example if Buy price was 10 lakhs and Sale price is 1.10 cr , Ltcg would be 1 cr without indexation.

if i reinvest 40 lakhs only in new property than Ltcg tax payable by me on 60 lakhs would  be 7.5 lakhs ( @ 12.5% for non indexation) only instead of 12.5 lakhs on entire gain of 1 Cr.

Please let me know if it's right

Thanks

A gift does not by itself remove eligibility for capital-gains exemptions. On sale, the son’s cost of acquisition and holding period generally trace back to the mother; for the 90% share later gifted to his wife, they generally trace back through the son to the mother. The gain and any exemption should be computed separately for the son’s 10% and wife’s 90% shares, with each person claiming exemption only against their own taxable gain.

Depending on the facts and the applicable law for the sale year, eligible individuals may claim section 54 by investing in a residential house, or section 54EC by investing in specified bonds within six months, subject to the respective conditions and limits. The mother’s original purchase date and cost, gift dates, sale date, ownership shares, and whether the property is a house or land/building are needed to calculate the gains and confirm eligibility.

This gift-and-sale sequence also calls for careful documentation of each owner’s cost, holding period and exemption claim. Manual tracking across deeds, dates and separate tax returns is difficult; automation can reduce repetitive work while keeping professional judgment in control. At Jir AI, our 2,000+ AI agents and 650+ integrations streamline GST, ITR, TDS, TCS and other compliance workflows, helping reduce manual workload by up to 70%. WhatsApp us to explore a smoother compliance workflow: https://wa.me/message/3HVOZ7HIY4ESC1