Tax on sale of gifted property

Fern (Querist) 26 September 2015 This query is : Resolved
My father had bought flat in 1979 for Rs 1 lac. I have inherited entire flat after my father's demise. Its present value is about Rs 2 crores. I am retired, plan to sell the flat in near future and go to native place. I do not want to buy another house as I have a house in native place.
To save from paying heavy LTCG tax, can I donate 75% of my share i.e., 25% to each - my mother, daughter (NRI) and wife? Whenever WE will sell it, may be after 3 years of gifitng, can each of us invest 50 lacs in CG Bonds to save CG tax.
What will be the cost of acquisition to each donee?
If donee will sell it before 3 years then will the profit be considered as Short term cap. gain?
Thanks for your guidance.

Follow Query

Report Abuse

R.K Nanda (Expert) 26 September 2015
consult tax lawyer.

Anirudh (Expert) 26 September 2015
The cost of acquisition for the donee is the cost for which the previous owner of the property acquired it.

In fact, as per the provisions of Income Tax Act, the 'previous owner of the property' in the context refers to one who has acquired it otherwise than by way of (i) distribution of HUF property by way of partition; (ii) under a gift or will; (iii) by succession, inheritance or devolution etc.

In the instant case, you have inherited it. Therefore, the cost of acquisition in your hand cannot be the cost of acquisition for the donees.

In other words, the cost of acquisition for donees would be 'NIL' as they get it by means of gift.

Therefore, they have to hold the property for a minimum period of 3 years to get the benefit of Long Term Capital Gain Tax.

Yes, each one of them will be entitled to exemption from payment of Capital Gains Tax by making a saving of Rs. 50 lakhs, in the CG Bonds.

If they sell within 3 years, then it will attract Short Term Capital Gains tax.