• Tax on gift

I am a female aged 58 years . Indian resident. As per my late father's Will proceeds from one of his property (purchased in 1995) was to be divided between me and my two sisters- A gift from him to his daughters. The property was sold in March 2019 and it's proceeds got divided between me and one of my sister only as my other sister gave up her rights in our favor. Will this proceed qualify for Capital gains tax or any other tax. Please advise of tax liability if any.
Asked 4 months ago in Capital Gains Tax

- It is a case of inheritance.Sale of immovable property is a capital asset and chargeable to tax at special rate depending on the nature of capital gain i.e. short term or long term. 

- In your case, property was purchased by father before 01.04.2001. In such case, cost of acquisition or Fair market value of property as on 01.04.2001 whichever is higher is considered. Capital gain will be calculated in the hands of two sisters. As the property was sold in March 2019 it should have been disclosed in the ITR of AY 2019-20. 


- To calculate tax liability, we need sale consideration,FMV as on 01.04.2001.


For detailed discussion, please contact telephonically.

Vivek Kumar Arora
CA, Delhi
4079 Answers
346 Consultations

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A capital gain may either be short term, or long term, depending on the period for which the asset was held. If the inherited house is held for more than 24 months, it is treated as a long term asset. This period of 24 months includes not only the period for which you held the house, but also the period for which it was held by the previous owner/s who had paid for it.

For a holding period of less than 24 months, the actual cost of acquisition and any cost of improvement are deducted and the balance amount is treated as short term gains and taxed at the slab rate applicable to you. If the combined holding period exceeds 24 months, you get the right to deduct the cost of acquisition and the cost of improvement as enhanced by the cost inflation index multiplier. The cost inflation multiplier is calculated, based on the cost inflation index of the year of purchase and the year of sale.

The cost of acquisition will be the amount paid by any of the previous owners, towards the purchase of the house. For example, consider a scenario, where you inherited a house from your father and he had inherited it from his father. If your grandfather had purchased the house for Rs 50,000, your cost of acquisition for capital gains purposes shall be Rs 50,000. Moreover, in case the house was inherited before 1st April 2001, you may substitute the fair market value of the property as on 1st April 2001 for the ‘cost of acquisition’ and apply the cost inflation index multiplier on that value.

If you invest your inheritance in something that generates an income, or you inherit an income producing asset, such as a rental property, then you'll need to pay Income Tax on that inheritance. If you sell the asset that you inherited and it has increased in value, you'll need to pay Capital Gains Tax


For calculation of capital gain we need more data 

We can assist you please have a phone consultation for details discussion.

Karishma Chhajer
CA, Jodhpur
2391 Answers
22 Consultations

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Please note that the right two events happened here.


1. Gift of property from your father and your sister to you


This event is not taxable because gifts from specified relatives are not taxable.


2. Sale of property and sale proceeds received from the property


This would chargeable to capital gain tax. The calculation of capital gain and tax thereon would depend upon the actual cost of the property in hands of the father and fair market value of the property as on 1. 4. 2001.


Please feel free to take a phone consultation for detailed discussion and discussion around how how to undertake valuation of the property as on 1.4.2001. We can help you in that.

Lakshita Bhandari
CA, Mumbai
5475 Answers
551 Consultations

5.0 on 5.0



Hope you are doing well !!


There would be tax liability on the same.


In respect of capital asset acquired before 1st April, 2001, the cost of acquisition will be higher of the actual cost of acquisition of the asset or fair market value of the asset as on 1st April, 2001. 


It is advisable to get the FMV/ valuation of the Property 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,"



To calculate the long-term capital gains tax payable, the following formula is to be used:

Long-term capital gain = full value of consideration received or accruing – (indexed cost of acquisition + indexed cost of improvement + cost of transfer), where:

Indexed cost of acquisition = cost of acquisition x cost inflation index of the year of transfer/cost inflation index of the year of acquisition.

Indexed cost of improvement = cost of improvement x cost inflation index of the year of transfer/cost inflation index of the year of improvement.


-Amount of capital gain would depend upon sale price, sale date, purchase price and purchase date etc.

Please share the details with us for exact capital gain calculation.


-We may assist you in getting the valuation report as on 01.04.2001, capital gain calculation, ITR filing & entire procedure. 


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


Payal Chhajed
CA, Mumbai
5084 Answers
157 Consultations

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Yes it will be liable for capital gain tax.


Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement. You can even book phone consultation for further personal assistance.

Thank you.

Naman Maloo
CA, Jaipur
3798 Answers
45 Consultations

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Dear Mam

Yes, the proceeds of such property will be taxed under Capital gains tax.



Brijendra Tripathi
CA, Lucknow
143 Answers
3 Consultations

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