Tax calculation - old property

[Nandagopal Samarajalingam]

When an old property (40 years old ) is inherited by the children from the father and after his death the property is sold currently and the proceeds are shared equally between the children, Is the Capital Gains tax is applicable individually for all the children ? How is the tax calculated, if applicable? What is the time limitation ?

[Rama Krishana]

Sharing of proceedings is only a factor, but the real issue transfer of ownership. Since the property is inherited by the children from the father after his death, children became the absolute owner of their share individually, though for the purpose of capital gains it is not treated as transfer at the time of death of father. Therefore, all the children's would be taxable individually. But, once, it is found that the property was the part of HUF property and HUF is unpartitioned, the position may be different.

[DEV KUMAR KOTHARI]

Do your ground work and then come for discussion with full information. Mr. Rama Krishna has replied well. Check the applicable personal law. whether property was inherited by father also, or whether it was from ancestral sources etc. As date of acquisition is prior to 01.04.1981 the fair market value as on 01.04.81 can be opted with benefit of cost inflation index factoring. In case there was any family settlement or understanding or gifts inter say amongst new owners, then capital gains may be taxable in hands of beneficiaries. This column of TaxTMI - Home is to initiate discussion and ascertain various possible views to further the object of learning and sharing knowledge and to clear doubts. The issue placed should include some basic information about the subject matter so that readers can at least have some idea about the issue, problem, related provisions and off course the views of the initiator of the issue. This will be helpful in getting better response from learned readers. In absence of the same, the readers cannot be serious about the issue and willing to spare time to merely provide information and solutions. This is my personal view.

AI Summary

Capital gains on inherited property: sale proceeds taxed individually to each heir; cost basis adjusted to original acquisition value. Inheritance of an immovable property does not constitute a transfer for capital gains at the time of the decedent's death; on sale, each heir is taxable individually on their share. Where acquisition predates an earlier reference date, heirs may elect a reference valuation and apply indexation to compute indexed cost. If the property is HUF property or if there are family settlements, gifts, or inter se arrangements, the tax incidence may differ and may render the HUF or beneficiaries taxable depending on ownership substance.