Where the capital asset becomes somebody else property on account of death , the treatment under I T Act is same as would have been applicable in case original owner , had he lived at the time of sale. Section 49(1) of the I T Act makes it amply clear:
49. (1)] Where the capital asset became the property of the assessee
(i) ….
(ii) under a gift or will;
(iii) (a) by succession, inheritance or devolution, or
the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be.
Since the cost of the asset is the cost to the original owner, the indexation to that cost is also to be done from the year of purchase by original owner in case of mode of acquisition is as per section 49 of the I T Act. This has been made very clear in section 55 of the I T Act where the cost of acquisition has been defined. Subsection 2(b)(ii) of section 55 is for cases like yours (i.e acquisition as per sec. 49 ) . It says:
(ii) where the capital asset became the property of the assessee by any of the modes specified in sub-section (1) of section 49, and the capital asset became the property of the previous owner before the 1st day of April, 1981, means the cost of the capital asset to the previous owner or the fair market value of the asset on the 1st day of April, 1981, at the option of the assessee ;
You become the owner of the property by mode specified in section 49(1) ,hence as per section 55(2)(b)(ii) ,cost to your husband shall be cost of the property.Therefore , I have not even iota of doubt that the capital gain on sale of property , although taxed in your hand , has to be computed by indexation from year 1981 in your case as the asset was purchased in 1970 by your husband.
Important Beneficial Point
As can be seen from definition of cost of acquisition in case of mode of acquisition given in section 49(1) , the cost of acquisition means
cost of the capital asset to the previous owner
OR
fair market value of the asset on the 1st day of April, 1981
at the OPTION of the assessee.
So, you get in contact with a valuer registered with income tax department and obtain a valuation report from him for fair market value as on 1/4/1981. You can then compute indexation on that fair market value From year 1981 till the year of sale.
In your case , it is required to be seen if the agriculture land is out definition of Capital Asset . If that is so , in that case only the sale of agriculture land will not be charged capital gains tax. So what is the definition of capital gains is as under :
(iii) agricultural land in India, not being land situate—
(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or
(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;]
Section 54B provides that if one or his or her parents used the land for agriculture purpose , two years before the transfer of the agriculture land which is subject matter of capital gains , then if he or she purchases another agricultural land within two years from the date of transfer of land , then amount equivalent to investment in agricultural land shall be exempt.
In case the sale of the land results in long term capital gains on which you will have to pay tax , you can claim exemption provided u/s section 54B ,54F and 54 EC which can be availed by you for reducing the tax or even exempting from payment of tax.
