BackCapital gain from sale of gifted property is taxable
The capital gain taxability in respect of property depends upon the period of holding of the property
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My mother wants to gift me a property in Gurgaon which she bought in February 2008. If I sell the property, will either of us have to pay tax on capital gain, if any?
—Jayant Nagpal
Any immovable property received by an individual from any person during any financial year (FY) without consideration, the stamp duty value of which exceeds 50,000, is taxable under the head “income from other sources" in the hands of the recipient. However, an exemption can be claimed if the said property is received from a relative which includes, among others, the mother of an individual. Accordingly, there should not be any tax implications for either.
You may maintain the necessary documentation/registration with respect to the gift transaction.
Any subsequent capital gain from sale of the aforesaid property shall be taxable in your hands. The capital gain taxability in respect of property depends upon the period of holding of the property.
If the property is held for more than 36 months from the acquisition date, then the resulting gains, if any, are termed as long-term capital gains (LTCG). In case of gifted property, the period of holding is reckoned from the date of purchase of property by the owner who has actually acquired the property, other than by way of inheritance, gift, and so no. As the property has been originally acquired by your mother, the period of holding will be reckoned from February 2008. As the said property has been held for more than 36 months, the gains, if any, shall be termed as LTCG.
The LTCG shall be computed as the difference between the net sale proceeds and cost of acquisition/improvement. For this purpose, the cost of acquisition shall be the cost at which the previous owner who has actually acquired the apartment, other than by way of inheritance, gift, and so on, as increased by cost of improvement made subsequently. Accordingly, the cost for which the property has been acquired by your mother shall be considered as the cost of acquisition while computing LTCG. While calculating LTCG, the cost of acquisition and improvement, if any, made subsequently should be adjusted by applying the Cost Inflation Index notified by the tax authorities in the year of purchase/improvement and sale, respectively.
The LTCG can be claimed as exempt from tax by reinvesting it in one new residential property situated in India or in specified bonds subject to other conditions specified within the prescribed deadlines.
Accordingly, the balance LTCG, if any, shall be taxable at 20%. Additionally, if you propose to sell the property and your total taxable income exceeds 1 crore, you would be required to pay a surcharge at 12% on the basic rate (i.e., 20%). Further, an education cess of 3% on basic as well as surcharge (if applicable) should be levied.
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