• Seeking Advice on Capital Gains Tax for Inherited Property Sale in India

I am seeking guidance on the potential tax implications for a property that is intended to be sold soon. The property, located in New Delhi, was inherited from my grandfather who passed away in 2016. After his demise, the property underwent a freehold conversion in December 2023 and was registered in my father’s name, who is 60 years old. We completed the necessary family agreements for the freehold conversion last year, with all siblings signing off.

We are currently looking for buyers, with an expected selling price of Rs. 85 lakhs. We aim to use the proceeds from this sale to purchase a residential property in Bengaluru. We are looking to understand the capital gains tax liability, considering it was inherited and only recently converted to freehold. The key points are:

The property was originally purchased by my grandfather (exact purchase year and cost unknown).
It was inherited by my father in 2016 but only transferred in his name in 2023 after conversion to freehold.
The expected sale year is 2024 after being in the family for an extended period.
We are interested in understanding potential tax exemptions or benefits associated with reinvesting the sale proceeds in another residential property.

Could you please advise on the anticipated calculation of capital gains, applicable tax exemptions, and any strategic advice on reinvestment for tax relief?

Thank you for your assistance.
Asked 11 days ago in Capital Gains Tax

Since the property was inherited, the long-term capital gains (LTCG) will be calculated based on your grandfather’s purchase price or Fair Market Value (FMV) as of April 1, 2001, with indexation.


Capital Gains Tax Calculation:


  • Sale Price: ₹85-90 lakh


  • Indexed Cost (assuming FMV ₹10 lakh in 2001): ₹36 lakh

  • LTCG = ₹49 lakh


  • Tax @ 20% = ₹9.8 lakh (plus cess)


Tax Exemption (Section 54):

  • Full exemption if LTCG is reinvested in another residential property within 2 years (or 3 years if under construction).

  • If purchase is delayed, deposit in Capital Gains Account Scheme (CGAS) before ITR filing.



Let me know if you need a precise cost calculation based on FMV.

For detailed, personalized advice, consider a phone consultancy. Hope you find the information helpful. You are free to contact me for further discussion. If you could spare two minutes of your time to write a review, it would be greatly appreciated and bring immense happiness to read it. Thank you. Shubham Goyal.

Shubham Goyal
Shubham Goyal
CA, Delhi
399 Answers
10 Consultations

- Assuming residential status of a seller as resident in India at the time of sale of the property

- Assuming inherited property is a house property

- Assuming property was acquired by the previous owner (grandfather) before 01.04.2001

- In case of inheritance of the property, cost incurred by the previous owner of the property is considered as cost in the hands of the legal heir. The holding period is also calculated from the date when the asset was held by the previous owner

- The inherited residential property is a long term capital asset therefore ang gain/loss arises from it would be the long term capital gain/loss

- Cost of acquisition would be higher of actual cost incurred or Stamp duty value as on 01.04.2001

- Cost of improvement would be capital expenditure incurred post 01.04.2001 either by previous owner and/or seller

 

Option 1

Tax@12.5% on LTCG

LTCG= Net Sales consideration less (cost of acquisition + cost of improvement) 

 

Option 2

Tax@20% on LTCG

LTCG= Net Sales consideration less (Indexed cost of acquisition + Indexed cost of improvement)

 

Exemptions available u/s 54, 54EC

u/s 54

Investment of capital gain in residential house property. For purchase it is 2 years from the date of sale of the property. For construction it is 3 years from the date of sale

 

u/s 54EC

Investment of capital gain in capital gain bonds within 6 months from the date of sale of the property. The maximum amount of investment allowed is Rs.50 lacs

 

For detailed discussion you may opt for phone consultation

 

 

Vivek Kumar Arora
Vivek Kumar Arora
CA, Delhi
Available Now
4992 Answers
1122 Consultations

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