Redistribution: May help reduce wealth concentration across generations.<\/li>\n<\/ul>\nTax arises on sale : When you sell the inherited property, you must pay capital gains tax on the profit. When you sell an older inherited property, tax saving on entire sale is usually subject to capital gains tax.<\/p>\n
Capital Gain = Sale Consideration \u2013 Indexed Cost of Acquisition \u2013 Expenses on transfer<\/strong><\/span><\/p>\nChallenges if Reintroduced<\/strong><\/span><\/p>\n\n- Impact on Family Businesses: Many Indian firms are family-run; estate duty could disrupt succession planning.<\/li>\n
- Capital Flight: Wealthy individuals may shift residency or businesses abroad to escape taxation.<\/li>\n
- Double Taxation Concern: Assets inherited may already have been subject to income tax or wealth tax during the lifetime of the deceased.<\/li>\n
- Administrative Burden: Valuation disputes, compliance complexity, and enforcement would be significant hurdles.<\/li>\n<\/ul>\n
<\/span>Ownership Methods & Legal Implications on\u00a0<\/strong>Inherited Assets<\/strong><\/span><\/span><\/h3>\n\n- Will of Succession : Legal heir inherits as per the will.<\/li>\n
- Nomination : Nominee becomes the rightful owner.<\/li>\n
- Joint Ownership : Surviving owner gets full control.<\/li>\n<\/ol>\n
Types:<\/strong><\/span><\/p>\n\n- Tenants in Common: Shares passed to legal heirs.<\/li>\n
- Joint Tenancy: Equal shares; survivor inherits.<\/li>\n
- Tenancy by Entirety: Between spouses; requires mutual consent to sell.<\/li>\n<\/ul>\n
<\/span>Immovable Property (e.g., land, house)<\/strong><\/span><\/span><\/h3>\n\n- Capital Gains Tax applies only when the property is sold.<\/li>\n
- Holding period includes the time held by the original owner.<\/li>\n
- If held for more than 24 months, it’s considered long-term capital gain (LTCG).<\/li>\n<\/ul>\n
<\/span>Step-Up Cost (Fair Market Value as on 1st April 2001)<\/strong><\/span><\/span><\/h3>\nFor properties acquired before 1st April 2001, you can take the Fair Market Value (FMV) as on 1st April 2001 (restricted to stamp duty value) as the Cost of Acquisition. This usually reduces the taxable gain significantly.<\/p>\n
Apply Indexation<\/strong><\/span><\/p>\n\n- Indexation allows you to adjust the cost of acquisition and improvement for inflation.<\/li>\n
- Indexed cost = Cost \u00d7 (CII of year of sale \u00f7 CII of 2001-02).<\/li>\n
- This helps bring down the capital gain substantially.<\/li>\n<\/ul>\n
Deduct Eligible Expenses<\/strong><\/span><\/p>\n\n- Brokerage\/commission paid for sale.<\/li>\n
- Legal expenses for transfer.<\/li>\n
- Cost of improvements (renovations, extensions, etc.) after inheritance or even by the original owner (if documented).<\/li>\n<\/ul>\n
Capital Gains Exemptions (Sections 54 to 54F)<\/strong><\/span><\/p>\nYou can claim exemptions by reinvesting the gains:<\/p>\n
\n- Section 54: Reinvest capital gain in a residential property (in India).<\/li>\n<\/ul>\n
\n- Must purchase within 1 year before or 2 years after sale, or construct within 3 years.<\/li>\n
- Only on Long-Term Capital Gain<\/em>.<\/li>\n<\/ul>\n
\n- Section 54EC: Invest up to INR 50 lakh in Capital Gains Bonds (NHAI\/REC\/IRFC) within 6 months of sale. Lock-in: 5 years.<\/li>\n
- Section 54F: If you sell a property other than a house (e.g., land) and invest entire net sale consideration<\/em> in a residential house.<\/li>\n<\/ul>\n
<\/span>Capital Gains Account Scheme (CGAS)<\/strong><\/span><\/span><\/h4>\nIf you can\u2019t reinvest immediately, deposit the gains in a Capital Gains Account Scheme before the due date of ITR filing (usually 31st July). You can later use it to buy or construct a property and still claim exemption.<\/p>\n
<\/span>Example Comparison<\/strong><\/span><\/span><\/h3>\nProperty Details:<\/strong><\/span><\/p>\n\n- Bought by father in 1998 for INR 10 lakh<\/li>\n
- FMV on 1 April 2001: INR 20 lakh<\/li>\n
- Sold by son in March 2025 for INR 1.2 crore<\/li>\n
- Brokerage: INR 2 lakh<\/li>\n<\/ul>\n
Option 1: Without Indexation<\/strong><\/span><\/p>\n\n- Capital Gains = INR 1.2 crore \u2212 INR 20 lakh \u2212 INR 2 lakh = INR 98 lakh<\/li>\n
- LTCG Tax @12.5% = INR 12.25 lakh<\/li>\n<\/ul>\n
Option 2: With Indexation<\/strong><\/span><\/p>\n
![\"property](\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2025\/09\/Screenshot-2025-09-14-130601.png\")
<\/p>\n