Hello Sunil ji, I am kedar & age 61, asking a question regarding the taxation on the amount of inheritance to my wife. After death my father in law (sasur ji) few years back, My mother in law (my sasu ma) had taken a decision regarding the agricultural land in their small town, which was purchased by the grandfather of my wife (father of my father in law) is develped and made it in the NA plots as per town planning scheme. these plots are now ready to sale. My sasu ma want to disribute the amont sold of these real estate plots., to her three married daughters including my wife. sir, here please guid us, regarding the amount recieved to my wife through her mother's house, is liable for any tax like capital gain or it will be treated as gift tax free amonut from mother's house as a stri-dhan (स्त्री-धन) and treated a tax free inheritance amont from her parants. kindly guide. thanks.

Ans: Hi Rajan

As the owner of the land is your father, the taxability would apply to him alone and not to you or your brother.

The query would need further clarity in terms of the following aspects:

Whether this was an agricultural land?
What is the distance of the land from the nearest municipality jurisdiction?
What is the population of the place where the land is located?

In case this is an urban non-agricultural land then you may need to get the valuation report for the land as on April 1, 2001 from an Income Tax approved valuer. This would become your basic cost reference on which you would need to apply indexation. An example is stated below for easy understanding.

Suppose the valuation report brings out a value of Rs. 20 Lakhs as on April 1, 2001

Current Cost Inflation Index (CII) is 331 and base year (2001) index is 100

So indexed cost of acquisition would be Rs. 20 Lakhs x 331 / 100, which is Rs. 66.20 Lakhs

So capital gain would be Rs. 75 Lakhs - Rs. 66.20 Lakhs = Rs. 8.80 Lakhs on which your father would need to pay 20+% of tax.

As this is a regular asset, in case he wants to pay NIL tax then he would need to reinvest the full sale consideration in some eligible asset such as residential house or capital gains bonds (go-downs / shops are not eligible assets).

If he reinvests in eligible asset partially then he would get exemption only proportionately. Taking the same example:

Suppose he reinvests Rs. 50 Lakhs in capital gain bond (say NHAI or REC) then the eligible proportionate exemption would be as follows:

Rs. 50 Lakhs / Rs. 75 Lakhs x Rs. 8.80 Lakhs = Rs. 5.87 Lakhs

He would need to pay the 20+% tax on Rs. 2.93 Lakhs. He would be eligible to marginal relief provisions if his pension income is not substantial. Also, he may end up with Nil tax if his total income is below Rs. 5 Lakhs

Ans: No, to claim exemption, amount should be invested by a person who have transferred and amount should be invested in residential HOUSE property.

Ans: Amount received under will/as a legal hair is not an Income.