Practising CA
33428 Points
Posted on 31 December 2010
In case inherited property or property received through a will is sold, cost to the previous owner will be taken as cost of acquisition. In case the previous owner has purchased the property prior to 1.4.1981, the previous owner's cost or market value of the property as on 1.4.1981, at the option of the assesee, will be taken as cost of acquisition.
For the purpose of deciding Long Term or Short Term Capital Gain, holding period of previous owner will be taken into account and if the capital asset is long term indexation will be done in respect of year of sale to year of acquisition or 1.4.1981 , as the case may be.
At the first instance when property is coming in the hands of sons from father either through gift or will, it will not be treated as transfer and hence question of capital gain does not arises here. However, when the property is sold by the sons to other(s) , then tha will be called transfer and in such situation capital gain would arise.