Query on Holding Period for LTCG/STCG on Sale of Gifted Property

Tax queries 161 views 2 replies
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46 Points Joined April 2011

Father purchased a flat in August 2008 in Navi Mumbai. Then he gifted the flat to his daughter in July 2024 through registered gift deed. Now daughter wants to sell the flat in year 2025 and she plans to reinvest entire sale proceedings to purchase a new flat in Navi Mumbai area. Daughter is major. Now I have following queries.

1)     What will be holding period of this flat to calculate capital gain tax in above condition ? Will it be STCG or LTCG ? Does she need to wait for 2 years from date of gift deed to qualify for holding period of 2 years for LTCG ?

2)      If she invests entire sale proceedings to buy new flat then can she claim exemption in LTCG ?

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On 12 March 2025 at 11:01 Report
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Master in Accounts & high court Advocate
9083 Points Joined December 2011

I'll address your queries: Holding Period and Capital Gain Tax: 1. *Holding Period*: The holding period will be calculated from the date of purchase by the father (August 2008) to the date of sale by the daughter (2025). 2. *Type of Capital Gain*: Since the holding period exceeds 2 years, it will be classified as Long-Term Capital Gain (LTCG). 3. *Waiting Period*: The daughter does not need to wait for 2 years from the date of the gift deed to qualify for the 2-year holding period. The holding period is calculated from the date of original purchase. Exemption from LTCG: 1. *Exemption under Section 54*: The daughter can claim exemption from LTCG under Section 54 of the Income-tax Act, 1961, if she invests the entire sale proceeds in a new residential property within the specified time limit. 2. *Conditions for Exemption*: To claim exemption, the daughter must meet the following conditions: - The new property must be purchased within 1 year before or 2 years after the date of sale of the original property. - The new property must be situated in India. - The daughter must not own more than one residential property, other than the new property, on the date of sale of the original property. Additionally, consider the following: -

*Transfer of Ownership*: Since the property was gifted to the daughter, the transfer of ownership will be considered as a transfer without consideration. This might impact the capital gain calculation. - 

*Indexation Benefit*: As the property was purchased in 2008, the daughter can claim indexation benefit on the cost of acquisition, which can help reduce the capital gain. 

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On 12 March 2025 at 13:00
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46 Points Joined April 2011

Hello Rama Sir

Thanks a lot for your detailed reply on my query.

 

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On 12 March 2025 at 20:42


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