Capital gains from ancestral property
I recently sold my ancestral property for Rs. 44 Lacs the property came to me after division amongst brothers and sisters years ago, since their was no document to value the original cost of the house, I was suggested by a local lawyer to get valuation done as per 1981 values and get indexation benefit for capital-gains.
I have already bought a house for Rs. 33 lacs and the value of house as on sale-deed date after indexation makes my capital-gains liability to zero. However, another IT lawyer friend of my said you cannot claim indexation-benefit as this was a gift from your ancestors and it incurred no value on you so indexation benefit cannot be claimed.
Pls. clarify can I get indexation benefit if this case as the property has no document of original cost whatsoever and came to me via mutually agreed division amongst brothers/sisters on notarised stamp papers.
Asked 2 years ago in Capital Gains Tax from Sirohi, Rajasthan
For an ancestral property, the period of holding is reckoned from the date of purchase of property by the owner who actually acquired the property otherwise than by inheritance or gift. As you propose to sell an ancestral property purchased in earlier years (assuming that the property was acquired by the original owner otherwise than by inheritance or gift), the resulting gains shall be classified as LTCG and you can avail indexation benefit.
In case of an inheritance, the cost of acquisition should be the cost for which the previous owner who has actually acquired the property otherwise than by inheritance or gift, as increased by cost of improvement made subsequently. Since the property has been acquired by the original owner prior to 1 April 1981, you have an option of taking the actual cost of acquisition if available or the fair market value of the property as on 1 April 1981.
You can contact me for further clarification.
Ok, Just to make things even more clearer does it makes any difference if the property was being handed down the line by my fore-fathers.
Asked 2 years ago
you will get indexation benefit in the manner first lawyer suggests
yes you can get indexation benefit. the first lawyer was right
In your case, I guess indexation on value as on 01.04.1981 would be considered although it is transferred down the line by forefathers. I hope, its clear now because you're entering in sales transaction so any value before 01.04,1981 you have to take basis of 01.04.1981 only.
there has been a recent case where indexation benefit is available in case of ancestral properties. You are eligible for indexation.
You can very well claim Indexation Benefits on the value as per 1981 records.
Trust this clarifies your query.
Feel free to get back/ call back for any further clarifications.
Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP
You can avail benefit of indexation.In your case cost of acquisition is of previous owner.if property purchased before 1981 you can take cost of acquisition fair market vale on 1981.
For more Detail refer
CIT vs. Manjula J. Shah (Bombay High Court)
In case of an inheritance, the cost of acquisition should be the cost for which the previous owner who has actually acquired the property otherwise than by inheritance or gift. Since in ur case the property has been acquired by the original owner prior to 1 April 1981, you can take the fair market value of the property as on 1 April 1981.
Indexation benefit will be available to you.
it will not make any difference if the property has been acquired by you fore-fathers.
You can contact us if you need further clarification.