We are 4 bro & sis. Our house was in my mother's name. Our father died earlier. Our mother did not make any will. After 5 years of mother's death, now we all want to sell the property and share it equally. My query is - the money I get (around 4 lacs) will be taxable? If so how much & how shall I calculate the same. Also is their any way I can save the tax, if any, legally. I am salaried person in tax bracket of 30%. Thanks in advance
RE:Sale of inherited property
by Amitabh on May 03, 2007 10:44 AM Permalink
In such cases,as you have inherited the house from your mother and she in turn has inherited the house from your father,the cost to the father will be treated as the cost of the house for the purpose of computing long term capital gain.If the house bacame the property of your father before 01.04.1981,you have the option to put the fair value of the house on 01.04.1981 as the cost of the house and multiply the same with the cost inflation index of the current year divided by the cost inflation index for 1981.This will give the cost of acquisition.Sale proceeds less cost of acquisition will be the capital gain.Any cost incurred on improvement of the house later will also be similarly indexed and added to the cost of the house.This capital gain will be taxed at the flat rate of 20 %.It will be taxed in the hands of the person who is the registered owner of the hosue,or in the hands of HUF,if any formed,consisting of the brothers and sisters or if all are co-owners,in the hands of each co-owner on his/her share.You can save this tax by investing the capital gain in another house within specified period as per Sec 54 or invest the proceeds in specified bonds as per Sec 54EC,your capital gain will be exempt.
RE:Sale of inherited property
by Goutam Paul on May 03, 2007 04:49 PM Permalink
Thank u very much..it is really helpfull, but only one thing i could not understand that "option of putting the fair value of the house on 01.04.1981". can u please elaborate this.Also in which site shall i get "Cost Inflation Index". Thanks again. Goutam
RE:Sale of inherited property
by Amitabh on May 03, 2007 07:24 PM Permalink
Look,capital gain is computed by deducting the cost of acquisition from the sale proceeds of the asset.If the asset is purchased/constructed by the assessee (your father in your case) before 01.04.1981,then instead of taking the actual cost as cost of acquisition,you may take the fair market value on 01.04.1981 as the cost.This may make the cost of acquisition higher and so capital gain will be lower.The cost inflation index for 1981-82 is 100 and that for 2005-06 is 497.If the house was aquired by your father after 1981-82 or if any of you have made any improvement after 01.04.1981,you will need the cost inflation index of that year when the house was acquired by your father or when the improvements were made,as well to act as denominator.The following are the cost inflation index notified by the government. 1981-82 100
1982-83 109
1983-84 116
1984-85 125
1985-86 133
1986-87 140
1987-88 150
1988-89 161
1989-90 172
1990-91 182
1991-92 199
1992-93 223
1993-94 244
1994-95 259
1995-96 281
1996-97 305
1997-98 331
1998-99 351
1999-2000 389
2000-2001 406
2001-2002 426
2002-2003 447
2003-2004 463
2004-2005 480
2005-2006 497 The index after this is not known so far.Can be checked once it is notified.Or you may ask on this very forum after some more time.
