• Capital gain from sale of inherited property

I sold my grandfather's property with house last month, which my father received through my grandfather's will. My grandfather purchased this property in 1960. The sale amount was divided between three legal heirs (my father is no more), my mother, sister, and I. My mother and sister gifted their share to me so that I can purchase a house. I would like to know my mother's and my sister's tax implications.
Asked 10 days ago in Capital Gains Tax from Bangalore, Karnataka

Hi

 

Capital gains shall be taxable in hands of your mother and sister in these circumstances.

 

However, proper arrangements could be made for tax planning. You may contact us personally.

Lakshita Bhandari
CA, Mumbai
4388 Answers
250 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

Where a capital asset has been gifted/inherited, the period of holding of the capital asset by the previous owner also needs to be taken into consideration in computing the number of years of holding. 

 

As the date of acquisition falls prior to 1 April 2001, you have a choice to consider the Fair Market Value (FMV) of the property as on 1 April 2001 as your acquisition cost. 

 

 

It is advisable to get the FMV/ valuation of the jewellery as on 01.04.2001 done from the registered valuer.

 

Government-approved valuers follow a standard process for the valuation and provide a detailed report.

 

Assumptions of any type for consideration of value shall not be entertained by the income tax department. In case of any enquiry, the department will consider the value stated in the valuation report from a registered valuer,"

 

The capital gain will be taxed at 20.8% on your mother's & Sister's hands. They can save tax by investing the sale amount in a new house or purchasing 54EC capital gain bonds. 

 

For further discussion and clarification you can avail phone consultation on tax full.

Payal Chhajed
CA, Mumbai
3904 Answers
54 Consultations

5.0 on 5.0

When was this gift made?

If it was made before sale then no tax implication on them and only you need to pay tax on entire capital gain.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
2847 Answers
25 Consultations

5.0 on 5.0

Since they wont have to pay any capital gain tax why would they have to save tax?

Naman Maloo
CA, Jaipur
2847 Answers
25 Consultations

5.0 on 5.0

Hello,

 

Whether your mother and sister gifted their share in the property before the sale of the property or they gifted the consideration received for their share to you.

In case they gifted the share in the property before the sale, the whole capital gain would be only upon you.

However, if they have gifted their share in the consideration, Capital Gain liability would be upon all three as per respective share in the property.

 

I hope that this answer satisfies your requirements. For further understanding or capital gain calculation, you can contact us directly at badlaniassociates at Gmail or take a phone consultation.

 

Regards,

CA Hunny Badlani

Badlani & Associates

Hunny Badlani
CA, Madhya Pradesh
1755 Answers
5 Consultations

5.0 on 5.0

Exemption from capital gain can be claimed by investment in another residential property u/s. 54 or specified bonds u/s. 54EC.

Hunny Badlani
CA, Madhya Pradesh
1755 Answers
5 Consultations

5.0 on 5.0

Gift is not a taxable transfer. Hence, if they gift the property to you, they will be absolved of any Capital Gains. You will be liable to Capital Gains tax whenever you sell the same.

 

The date and cost of Purchase for Original buyer will be deemed to be the date and Cost of Purchase in your hands for the purpose of calculating Capital Gains   

Pradeep Bhat
CA, Bengaluru
532 Answers
42 Consultations

5.0 on 5.0

Instead of gifting before, they could have invested in your name. The funds could be rotated again so as to complete the transaction in such a way so that tax could be saved.

 

The payment for purchase of house property in your name has to be made through their accounts. 

Lakshita Bhandari
CA, Mumbai
4388 Answers
250 Consultations

5.0 on 5.0

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed
CA, Mumbai
3904 Answers
54 Consultations

5.0 on 5.0

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