I inherited grandfather’s property. Please clarify revenue tax guidelines if I promote it

My grandfather constructed a constructing in 1989, the place all his sons i.e. my father and uncles, bought flats.  Subsequently a flat within the constructing was handed on from my grandfather to my father on the dying of grandfather within the 1990 after which from my father to my mom in 1998, and upon her demise in 2003, to my brother and me. We have now offered the flat. Will your complete sale proceeds obtained by us be taxed as now we have incurred no value in any respect? 

Answer: For computing the capital positive aspects, willpower of value of acquisition is essential. So earlier than answering your query, first allow us to perceive how the price of acquisition is decided for the aim of taxation of capital positive aspects below the tax legal guidelines in case of belongings which aren’t purchased by you however have been obtained by you both as an inheritance or as a present. An inheritance could be both below a Will or could be below private legislation in case the individual has died with out leaving a sound will. In such circumstances the price of acquisition within the hand of current proprietor isn’t zero however the price of the earlier proprietor who had paid for it. Moreover, the holding interval, in such circumstances is to be taken from the date from the acquisition date of the earlier proprietor who had paid for it for figuring out whether or not it’s a brief time period asset or a long run asset.

Since your grandfather had incurred the associated fee for establishing the constructing, value of the flat inherited by you and your brother will likely be proportionate share of your flat in the associated fee incurred by your grandfather for establishing the constructing, to start out with. Since the flats had been constructed earlier than 1st April 2001, you have got the choice to decide the honest market worth of the flat as on 1st April 2001 as your value of acquisition for the computing the capital positive aspects. 

For ascertaining the honest market worth of the flat on 1st April 2001, you have got can take the stamp responsibility prepared reckoner charges or get hold of a valuation report from a registered valuer however the honest market worth as per the valuation report can’t exceed the stamp responsibility charge/circle charge of the flat as on 1st April 2001. Since you’ll go for substituting your value of acquisition by honest market worth as on 1st April, 2001, you’ll have to pay tax on long run capital positive aspects at flat charge of 20% on the distinction between the honest market worth and listed value of the flat within the 12 months of its sale. 

There are distinction of opinion whether or not the indexation profit will likely be obtainable from the date when the unique holder had acquired or from the date when the vendor acquired it. The legislation offers for indexation from date on which the vendor bought to personal the asset however a number of tax tribunals have held that the indexation ought to be allowed from the date when the unique holder acquired it or from 1st April 2001 in case the honest market worth as on 1st April 2001 is opted.

Moreover, the entire holding interval of all of the earlier proprietor is greater than two years the capital positive aspects will likely be long run capital positive aspects. 

Balwant Jain is a tax and funding knowledgeable and could be reached on jainbalwant@gmail.com and @jainbalwant on Twitter

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