How is the sale of gifted property taxed?

My father gifted me a home value ₹54.5 lakh in June 2017. I’ve paid ₹4.5 lakh as stamp obligation on the identical. I’m planning to promote the home for ₹2 crore within the present monetary yr. How is capital achieve computed on this and the way a lot tax ought to I pay.

—Name withheld on request

Any immovable property, together with a home, obtained by a person taxpayer throughout any monetary yr (FY) with out consideration, the stamp obligation worth of which exceeds ₹50,000, isn’t taxable whether it is obtained from a relative which incorporates, amongst others, the daddy of a person. Therefore, there shouldn’t be any tax implications on such reward transaction.

Any subsequent capital achieve from sale of the home shall be taxable. If the property is held for greater than 24 months from the acquisition date, then the positive factors are termed as long-term capital positive factors (LTCG). In case of property obtained as reward, the interval of holding is reckoned from the date of its buy by the acquirer, apart from by the use of reward. If the property has been initially acquired by your father, the interval of holding can be reckoned from such buy date. As the property has been held for over 24 months, the positive factors shall be termed as LTCG and taxable on the fee of 20% (plus surcharge and cess).

LTCG shall be computed as the online sale proceeds (i.e. after deduction of gross sales bills) much less value of acquisition and enchancment. For this goal, the price of acquisition shall be the price at which such home was initially acquired, as elevated by any value of enchancment made subsequently. Hence, the price of authentic buy (earlier proprietor) shall be thought of as the price of acquisition whereas computing LTCG. Further, the price of acquisition and enchancment needs to be adjusted by making use of the price inflation index as prescribed. In case, asset was initially acquired earlier than 1 April 2001, calculation of value of acquisition and value of enchancment can be barely completely different.

Please observe that the LTCG might be claimed as exempt from tax by reinvesting in sure property as per prescribed mechanism. Seeking skilled steerage for LTCG computation and tax planning might be useful.

Aditya Goyal is a chartered accountant based mostly out of Bengaluru.

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Updated: 28 Aug 2023, 10:56 PM IST