Sale of inherited property

For your inherited 3 BHK flat, the cost of acquisition is the market value in 2019, adjusted for inflation using the Cost Inflation Index (CII). Since you inherited it in 2019 and sold it in 2025, it qualifies as long-term capital gains (LTCG).

Tax Options (Amendment 2024):

1. 
   12.5% without indexation, or
2. 
   20% with indexation (recommended, as it lowers taxable gains by accounting for inflation).

Capital Gain Formula:
Selling Price (2025) - Indexed Cost of Acquisition.

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Assuming your residential status as non-resident

- As you have inherited the flat therefore cost of acquisition would be cost to the previous owner and the period of holding would be reckoned from the date previous owner held it

- Benefit of indexation is not available to the non-resident on the sale of immovable property on or after 23.07.2024

- The rate of tax is 12.5%

- Long term capital gain would be the selling price minus cost of acquisition

- To save tax, you can claim exemption u/s 54/54EC

- Buyer is liable to deduct TDS u/s 195

- For repatriation of proceeds outside India, you are liable to file Form 15CB and 15CA with the banker

For detailed discussion you may opt for phone consultation

To determine the capital gain in this case, we need to calculate the cost of acquisition of the inherited property. Here’s how the capital gains calculation works for your scenario under Indian tax laws:

Key Points:

1. Cost of Acquisition: Since the flat was inherited, the cost of acquisition is deemed to be the cost at which the previous owner (the person from whom you inherited the property) acquired it. If the property was acquired by the previous owner before April 1, 2001, you can take the fair market value (FMV) as of April 1, 2001, or their actual purchase price—whichever is higher.

   In your case, since the flat was under development in 2019, you will consider its market value or the price the builder was offering in 2019 if that aligns with the price the original owner "paid." You cannot automatically assume it as the market price unless documented.

2. Indexed Cost of Acquisition: The cost of acquisition is adjusted for inflation using the Cost Inflation Index (CII) from the year the previous owner acquired it or 2019 (if inherited that year), to the year of sale (2025). The formula is:

   Indexed Cost of Acquisition=Cost of Acquisition×CII of 2025CII of 2019\text{Indexed Cost of Acquisition} = \text{Cost of Acquisition} \times \frac{\text{CII of 2025}}{\text{CII of 2019}}Indexed Cost of Acquisition=Cost of Acquisition×CII of 2019CII of 2025​
   

3. Capital Gains: Long-term capital gains (LTCG) are calculated as:

   $$\text{LTCG}=\text{Selling Price}-\text{Indexed Cost of Acquisition}-\text{Expenses incurred during transfer (e.g., brokerage, legal fees)}$$
   

Steps for Calculation:

1. Determine the Cost of Acquisition:
   This is the market value or the builder's selling price in 2019 for similar flats.

2. Index the Cost of Acquisition:
   Use the CII for 2019 and 2025 to adjust for inflation.

3. Calculate the LTCG:
   Subtract the Indexed Cost of Acquisition and any selling expenses from the selling price in 2025.

Example Calculation:

• 
  Flat’s market value in 2019 (cost of acquisition): ₹1 crore
• 
  Selling price in 2025: ₹2 crore
• 
  CII for 2019: 289
• 
  CII for 2025: 348

Indexed Cost of Acquisition:

1,00,00,000×348289=₹1,20,41,5221,00,00,000 \times \frac{348}{289} = ₹1,20,41,5221,00,00,000×289348​=₹1,20,41,522

LTCG:

$$2,00,00,000-1,20,41,522=₹79,58,478$$

Note: Additional deductions (e.g., transfer expenses) and exemptions (e.g., Section 54) can further reduce your taxable gain.

Conclusion:

The capital gain is the difference between the selling price in 2025 and the indexed cost of acquisition, which is based on the market value in 2019 (or the price the previous owner acquired it for, if applicable).