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Property Inherited in Mumbai - Capital Gains Tax Question?

T S Khurana |496 Answers |Ask -Follow

Tax Expert - Answered on Dec 21, 2024

A certified management accountant since 1993, T S Khurana is a fellow member of The Institute of Cost Accountants of India. His areas of expertise are income tax, specifically litigation cases, and GST.

Since the last 21 years, he has also been providing expert advice on financial matters, including investments and diversification of funds, and wealth building in the long term to his clients.
He believes that investment in real estate is the safest way for better returns and wealth generation over a period of time.

A former chairman of the Chandigarh Chapter of Institute of Cost Accountants of India, T S Khurana has also served as member of its technical committee.... more

Asked by Anonymous - Dec 21, 2024Hindi

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Dear Guru. I have inherited a property in Mumbai from my deceased father which was purchased in 1983 by him. If today i sell the property which is worth 2.60 Crs whats my capital gains tax and how will it be calculated

Ans: 01. In absence of exact figures, it is not possible to calculate your Capital Gains Tax. However, following details may help you to assess your tax liability.
02. Under present provisions of Income Tax Act, you may opt any of the options (Long Term
Capital Gains), as under :
(a). Tax Rate 12.50% without indexation or
(b). Tax Rate of 20% with Indexation.
03. You may calculate your tax liability under both options & may opt for the tax regime, where tax liability is minimum.
04. Most welcome for any further clarifications. Thanks.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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Sir, I have purchased a flat for Rs. 40 lakhs in Warje area of Pune in 2012 and I sold it for Rs. 60 lakhs in 2023 after 11 years. What is my capital gains tax?

Ans: Capital gain amount is derived by deducting indexed cost from sale consideration.

Assuming residential property is acquired in FY 2012-13 in 40 lacs, indexed cost will be Rs.69,60,000 and accordingly there will capital loss.

You can calculate the indexed cost from the income tax calculator https://incometaxindia.gov.in/Pages/tools/indexed-cost-of-acquisition-or-improvement.aspx

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Asked by Anonymous - Jun 30, 2024Hindi

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My father in law had a house which he constructed in 1990 on a plot cost was 2 lakhs. After his demise the house is being sold for 78 lakhs jun 2024. The proceeds of sale went to mother in law and two daughters. 33.3% each. How will be the capital gain tax be calculated and how will it tax liability for all three. All three are not working now. Help

Ans: Each of the beneficiaries shall file ITR separately and pay tax under the head Long Term Capital Gains. Since the plot is sold in June 2024, it shall be reported in ITR of A/Y 2025-26. Rate of LTCG Tax will be 12.50% (on gain only). Cost of plot as mentioned remains Rs.2,00,000.00, however please add Cost of Construction (which is not mentioned in the question) of house in the cost.
All the three are eligible for relief either by investing in house property or purchasing Capital Gains Bonds of NHAI or REC etc.
Most welcome for any further clarification. Thanks.

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Question by Deepak - Jul 02, 2024Hindi

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My Father has purchase a property for rs 115000 in year 1994.at Bhayandar west district Thane at Maharashtra state.and my Father did this registration in amnesty scheme in year 2008.and after that my Father died in year 2014.and after I made a release deed transfer this property in my name (son). I sold this residential property in June 2024for rs 30lakh.in this case I want to know the status of capital gain is there or not I also want to know if I sell this residential property .I can purchase ashop or not. If I want to save capital gain what is the solution to save my tax. Thanking u.

Ans: You sold a property in June 2024 for Rs 30 lakh. It was bought for Rs 1,15,000 in 1994. Let's evaluate if there's a capital gain.

Indexed Cost of Acquisition

The property purchase cost will be adjusted for inflation. This is called the Indexed Cost of Acquisition (ICA). The ICA is calculated using the Cost Inflation Index (CII) provided by the Income Tax Department.

Calculating Indexed Cost

Calculate the ICA to understand your capital gain. Since we won't use specific formulas here, you can consult a Certified Financial Planner to get the precise ICA value. This helps in determining the exact capital gain.

Long-Term Capital Gains (LTCG)

Since you held the property for more than 24 months, it is classified as a long-term asset. The profit from the sale, after adjusting for the ICA, is your Long-Term Capital Gain (LTCG).

Tax on LTCG

LTCG is taxed at 20% with indexation benefits. However, there are ways to save on this tax.

Investing in Another Property

You can save on capital gains tax by investing in another residential property. This is covered under Section 54 of the Income Tax Act. If you buy a residential house within two years or construct one within three years, you can claim exemption.

Investing in Capital Gains Bonds

Another option is to invest in Capital Gains Bonds under Section 54EC. These bonds have a lock-in period of five years and provide tax exemption on the gains. The maximum investment limit in these bonds is Rs 50 lakh.

Purchasing a Shop

Buying a shop will not provide capital gains tax exemption under Section 54. The exemption is only for residential properties. If you sell a residential property, you must reinvest in a residential property to save on capital gains tax.

Other Options to Save Tax

Residential Property: Invest in another residential property within two years.

Construction: Construct a new house within three years.

Capital Gains Bonds: Invest in these bonds within six months of the sale.

Final Insights

To save on capital gains tax, reinvest in a residential property or Capital Gains Bonds. Purchasing a shop will not help in saving tax on capital gains. Consulting a Certified Financial Planner can help you navigate these options efficiently.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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Insurance, Stocks, MF, PF Expert - Answered on Oct 25, 2024

Asked by Anonymous - Oct 24, 2024Hindi

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On 15.10.24 I have sold property for 1 .60 cr.., the property is 35 yrs old, how to calculate capital gains tax. Kindly advise

Ans: Hello;

The latest budget gives you two options:

1. 12.5% LTCG on 1.6 Cr minus cost of acquisition 35 years before.

2. 20% LTCG on the difference between 1.6 Cr and indexed cost of acquisition.

For this calculation it is advisable to approach a CA or a professional tax advisor who can also advise you ways to save LTCG tax payment through exempt investments permitted under income tax act.

Best wishes;

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Faculty quality at both institutions includes PhD holders from premier institutions, with SOA reporting 111 scientists with 500+ citations and CGC Landran emphasizing industry-experienced faculty with practical teaching methodologies. Both institutions maintain strong alumni networks, though SOA ITER's established reputation since 1996 provides broader industry connections compared to CGC Landran's growing influence since 2001.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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