• Selling inherited property

My Father purchased property worth 7 thousand INR in 1968 (Father demise in 2014)
We (siblings) planning to sell this property as per current market value of 3-3.5 CR INR 
Firstly, what all taxes, hidden taxes, short & long term capital gains are applicable & how much calculated on the sale of property?
Secondly, my brother is unemployed and want to use his some share on his Business activity while rest on investment? How he can exempt from taxes?
Thirdly, what all exemption can be added while calculating tax & capital gain?
Lastly, where to invest with minimum locking period to exempt from taxes & capital gains?
Asked 12 months ago in Capital Gains Tax from Meerut, Uttar Pradesh

It is better if you get the valuation certificate as on 01st April 2001, to help you advise more precisely. It doesn't make sense advising vaguely.

Still I may answer your queries :

1. Long term capital gain is applicable. Tax can be quantified only after you get the valuation.

2. He has to invest the capital gain in tax saving measures, balance amount he can use in his business (quantification can be given only after valuation is provided)

3. I did not understand this question ? What do you mean by adding exemption ?

4. Minimum lock in period is 3 years under various options.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Rohit R Sharma
Rohit R Sharma
CA, Mumbai
2104 Answers
91 Consultations

5.0 on 5.0

your transaction is under long term capital gain and taxed @ 20%.

calculation is as under 

sales value - exp on transfer - indexed cost of purchase of your father - indexed cost of improvement(if any) 

balance is capital gain which is subject to tax

now you can invest in residential property under section 54/54F/54EC to save tax, these exemptions are subject to some conditions
Lalit Bansal
CA, Delhi
559 Answers
37 Consultations

5.0 on 5.0


First of all, you need to find out he stamp duty value (SDV) of your property as on 1.4.2001. This will be then indexed till the current year (i.e. multiply the derived value as on 1.4.2001 by 2.72). In the above value you can also add indexed value of any major structural improvement made in the property post 1.4.2001.

Now dedcut the above value from the sale proceeds and you will get the amount of capital gain. It will be long term capital gain. you have following options to get exempt from the capital gain:

1. Invest in another house property (with 3 years lock-in)
2. Invest in REC/NHAI bonds (with 3 years lock-in) - maximum upto 50 lacs per person

Please feel free to call/ revert in case you need more clarity

Thanks and regards
Abhishek Dugar
Abhishek Dugar
CA, Mumbai
3578 Answers
161 Consultations

5.0 on 5.0


For calculation of capital gains, FMV as on 01.04.2001 has to be known. This would be indexed to arrive at the cost of acquisition. Sales price minus cost of acquisition will give capital gains. This will be Long term capital gain.

Income tax  has to be paid on such capital gains unless you reinvest the proceeds. If the property was residential, the amount of capital gain needs to be invested and if not, then amount of total consideration received.

For exemptions, reinvestment can be done in another house property within 2 years of sale OR 54EC bonds can be purchased within 6 months of sale which will have a holding lock-in period of 3 years.
Lakshita Bhandari
CA, Mumbai
2177 Answers
71 Consultations

5.0 on 5.0


If your mother is still alive, then the property will devolve to you, your siblings as well as your mother. All of you will have equal share in the property, as per Hindu Law.

Capital gains is computed by subtracting the indexed cost of acquisition from the sale consideration. The resultant amount will be the total capital gains and tax will be payable by each one of you at the rate of 20%, on your proportionate share. 
From the sale consideration, you can reduce any expenses incurred for the sale, such as brokerage, etc.

Indexed Cost of Acquisition:
Indexed cost of acquisition will be the actual cost of acquisition as increased by the inflation index. The actual cost of acquisition is multiplied by the cost of inflation index for the year of sale and divided by the cost of inflation index for the year of purchase. The index for 2017-18 is 272. 
Since it is an old property, you will require the market value of the property as on 1 April 2001 and the inflation index for 2001 is 100. So the market value of the property as on 1 April 2001, multiplied by 272 and divided by 100, will be the indexed cost of acquisition. 
Also, in case you have incurred any expense after 2001 for the improvement of the property, then that can be indexed as well.

To claim exemption of capital gain, you can either:
1. Invest the amount of capital gain in a residential house in India. You can invest in a fully constructed property within 2 years, or in an under-constructed property within 3 years. You can also claim exemption if you had purchased a property 1 year before the date of sale.
2. Invest the amount of capital gain in Capital Gain Bonds for a period of 3 years. The interest arising out of such bonds will be taxable.You should invest within 6 months from the date of sale of property

Please note, each of you i.e. your mother and siblings and you will have to invest separately, based on your individual share in capital gains.

Your brother can claim exemption only if he does one of the above investments.
Keerthiga Padmanabhan
CA, Greater Mumbai
784 Answers
23 Consultations

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