Capital gain

adv. rajeev ( rajoo ) (Querist) 02 October 2020 This query is : Resolved
Father had gifted property 50 years ago. After his death his son inherited the same and sold the same after 3 years of inheritance. So how to calculate the capital gain.

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Quick Summary

When you sell a property received as a gift or inheritance, you may need to pay capital gains tax. The cost of acquisition for tax purposes is generally the original cost to the person who first bought the property, not the person who gifted it. For long-term capital gains, this cost is adjusted using the cost inflation index to account for inflation.

Rajendra K Goyal (Expert) 02 October 2020
An immovable property received as a gift, when sold, will be subject to income tax on the capital gain earned on the sale. For the purpose of determining the capital gains, the cost of acquisition will be taken to be the cost to the last owner who purchased it.
In case of long term capital gains the capital gains is calculated according to indexed cost of acquisition and improvement. Cost inflation index of the year of acquisition and improvement is considered for the purpose of capital gain calculation.
section 49(1) provides that the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be.
Please visit:
https://taxguru.in/income-tax/capital-gain-case-gifted-inherited-properties.html

Dr J C Vashista (Expert) 03 October 2020
Dear Mr. Rajoo/ Rajiv,
You are misconceived.
The property is self-acquired when it was accepted in donation through validly executed "Gift Deed", which do not retain its character of "inheritance" by successor.
Thanks and regards

Dr J C Vashista (Expert) 03 October 2020
It would be better to seek guidance from some local "senior" to appreciate the documents.

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