A property is not taxable to the recipient when it is inherited or received as a gift. When the gifted property is sold by the inheritor or the recipient, the capital gains on gifted property are taxable to the inheritor.
Assist yourself with the expert legal assistance service from NoBrokerAfter getting clarified on your query, about is capital gains tax applicable on gift property, I’d like to move on to the calculation part.
How to calculate capital gains tax on sale of gifted property in India?
The procedure to calculate the capital gains tax on gifted property is given below:
To calculate capital gains tax on property received as gift, you must know the acquisition and indexation costs.
Cost of the property: Although the property was free to the inheritor, the former owner's out-of-pocket expenses are taken into account when calculating capital gains.
Indexation of cost - In addition to the year the property was sold, the year the previous owner purchased the property is taken into account when calculating the cost of acquisition.
For these computations, the base year has been revised from 1981 to 2001.
Utilising the equation Cost of acquisition x (Cost inflation index of the year of sale / Cost inflation index of the year of acquisition), determine the cost of capital gains.
where the Cost Inflation Index (CII) fluctuates each fiscal year
To determine the net profit of the transaction, deduct the cost of capital gain from the selling price of the property.
STCG = (Total Sale Price) – (Cost of acquisition) – (expenses directly related to the sale) – (cost of improvements).
In this case, the inheritor or recipient of the gift incurs NO acquisition costs. However, the price paid by the prior owner (donor) is taken into account for calculating capital gains.
Short-term capital gains are taxed at the appropriate income tax slab rates and are included in your taxable income.
Long-Term capital gains on property received as gift in India;Calculating LTCG is comparable to computing STCG. The only distinction is that you can use certain exemptions to reduce your tax on long-term capital gains and that you can deduct your Indexed Cost of Acquisition/Indexed Cost of Improvements from the sale price.
I’d like to conclude here about the capital gains on gifted property. I hope this helps:)
Read More:
What is LTCG Tax Rate? What is the LTCG Tax-Free Limit in India? Gift Deed Property Can be Sold or Not?Your Feedback Matters! How was this Answer?
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Authors Of The Question
Is Capital Gains Tax Applicable On Gift Property?
Sahil
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2023-01-18T07:34:54+00:00 2023-01-18T07:34:55+00:00Comment
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