Gifted property

Dear Sir, Thanks for your earlier response .I needed a clarification. My father-in-law gifted a portion of house (constructed in 1978) to my wife and her sister.My wife now is selling her 50% share of the gifted property to her sister (who will enjoy 100%) for Rs 10.50 lacs Will the amount attract Capital Gains ? If so what will be the tax payable. Regards Vasant

asked Oct 13 '11 at 15:12 by cjvasant 1232

It would be considered long term gains and 20% income tax would be payable on gains.
Below computation would be used to compute gains:

Purchase Year = A
Purchase Cost = P
Cost Inflation Index (CII) for purchase year = X

Sale Year = B
Selling price = Q
CII for sale year = Y

Indexed Purchase price = P x (Y/X) x Percent share in property = R
Long term capital gain = Q - R = S
Income tax on capital gain = S x 20%

Here A will be original year of construction/purchase by your father-in-law and P cost for the same. As cost inflation index was started only in 1981, A would be taken as 1981 and P will be fair market value of house in 1981. CII for 1981 (X) will be 100.

Sale year would (B) would be 2011, selling price 10.5 lakh, CII for 2011-12 is 785.

You may compute the LTCG figure S using above figures and 20% income tax would be payable on that.

But as its a sale between sisters. I would advise to rather than selling the property, your wife can gift property to her sister (there won't be any tax on it) and in turn her sister can gift 10.5 lakh (no income tax on it either)

answered Oct 13 '11 at 17:09 by Pankaj Batra 5.2k320


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Asked: Oct 13 '11 at 15:12

Seen: 2,378 times

Last updated: Oct 13 '11 at 17:09