Tax on residential sale proceeds received through a will

Our mother is absolute owner of a Residential property, which  she wanted to settle among three children. She made a WILL and proposed that property be sold and sale proceeds should be divided into three equal shares. Three shares should be given to three children, each one share. After the demise of mother the children sold the property and took the shares as per WILL. As per Indian constitution there is no tax on sale proceeds in the hands of children. What is capital gain Tax.
Asked 9 months ago in Capital Gains Tax from Bangalore, Karnataka
Yes you are liable to pay tax on sale of property in question
Anuj Agarwal
CA, Aligarh
34 Answers
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Dear sir, Even going through that facts as provided by you my opinion does not change on chargebility of tax and view of fact as mentioned above the executors  of the WILL along with other beneficiaries are liable to capital gain tax
Anuj Agarwal
CA, Aligarh
34 Answers
4.6 on 5.0
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Sir at the time of death of the mother the property has been taken by children as per her will. There will not be any tax liability at that time.

But at the time of sale of property Capital Gains tax is liable to be paid. Tax will be attracted at the time of sale. The cost of acquisition will be the cost of purchase by their mother.

You cannot escape tax at the time of sale by saying that you received this through will and at the time of sale there will not be any tax.

After paying the capital gains tax the executors can distribute the same in whatever way they want as per their mutual consent.
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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There is no estate duty on inheritance of property. However, when the residential house is sold, the cost to the previous owner will be your cost u/s 49 of IT Act.
B Vijaya Kumar
CA, Hyderabad
290 Answers
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As per provisions of Income Tax Act, 1961 it will be taxable as

When a property is received on inheritance or as a gift, it is not taxable for the receiver. When the inheritor or the receiver of this gift of property, sells it, capital gains on the sale are taxable for the inheritor.

The capital gains shall be calculated in same manner as here, the cost of acquisition and indexation shall be done as follows.

Cost of the property – The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the Property.

Indexation of cost – Additionally, the year of acquisition of the previous owner is considered for the purpose of indexation of the cost of acquisition.
Bhagyashree Kankaria
CA, Pune
26 Answers
5.0 on 5.0
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Dear Sir,

In your case you will not be taxed at the time of receiving the property through will but Capital Gain Tax will have to be paid at the time of Sale of Property.

To Compute Capital Gain you can reduce the Indexed Cost of Acquisition from the Sale Proceeds. Cost of Acquisition will be the Cost on which your Mother has purchased the property.

Trust this clarifies your query.

Feel Free to get back for further clarifications.

Thanking You.

Regards,
CA Rohit R Sharma
BCOM, CA, LLB - GEN, CERT. FAFP.

Rohit R Sharma
CA, Mumbai
719 Answers
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Dear Tax Payer,

From the given facts, it is concluded that there are two transfers happened which shall come under the purview of the Income-tax Act, 1961.

1. Transfer of the Residential Property from  Mother to Children by way of Will.
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As per section 56, any gift received under a will or by way of inheritance is exempt from Income Tax. Hence, there is no tax liability when the house property was transferred from the mother to the children by way of will.

2. Transfer of the Residential Property from  Children to Third party
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This will be considered as a transfer under under the Income-tax Act,1961 for the purpose of capital gain tax. Here, the capital gain shall be taxed equally (1/3 portion) in the hands of each children. 

Capital Gain Exemptions Available
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1. If the assessee reinvest the capital gain in another residential house property, exemption under section 54  can be claimed by the assessee subject to such conditions as prescribed.
2.Investment in 54EC bonds (NHAI/REC bonds) subject to such conditions as prescribed.

Regards,
CA. Rajeev P T, BBA, ACA, ACS
Email: ca.rajeevpt@gmail.com

*****This Opinion is based on stated facts and the legal position as on date. The views expressed may not be relevant where there is any change in facts or law. This Opinion is not in the nature of an assurance that an alternative view or interpretation cannot emerge.
Rajeev P T
CA, Chennai
34 Answers
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