How will we keep away from tax on division of property?

My three siblings and I inherited an condo from my father after his loss of life. Since each our dad and mom aren’t any extra, we intend to promote this flat and distribute the cash among the many 4 of us. Is there a approach to keep away from tax on this? It just isn’t written wherever in my father’s will that it’s a present.

—Manasi Kadane

We perceive that your question is in relation to a residential home property inherited by you alongside together with your three siblings.

Any acquire or loss arising from sale of such inherited property shall be chargeable to tax as capital acquire or loss for all of you within the yr of sale.

As there is no such thing as a particular present deed nor any particular ratio specified within the will, the acquire on sale of such property collectively inherited by you and your siblings must be taxable in equal proportion (topic to assessment of the particular paperwork).

Where the property has been held for greater than 24 months previous to sale, the identical shall be thought-about as a long-term capital asset and any acquire or loss arising from its sale shall be thought-about as long-term capital acquire (LTCG) or long-term capital loss (LTCL). Else, the identical shall be thought-about short-term capital asset and any acquire or loss arising from its sale shall be thought-about as short-term capital acquire (STCG) or short-term capital loss (STCL).

For calculating the interval of holding of such inherited property, the tenure for which the property was held by your father (being the earlier proprietor), shall even be thought-about.

The capital positive aspects or loss shall be calculated because the distinction between the sale consideration and value of acquisition and enchancment. Cost of acquisition shall be the precise value of the property within the palms of earlier proprietor as elevated by any value of enchancment if any.

In case of LTCG, advantage of indexation for value inflation shall even be accessible. In case the property was acquired by your father earlier than 1 April 2001, then the truthful market worth of the property as on 1 April 2001 or the precise buy value, whichever is increased, shall be thought-about as value of acquisition for the aim of computation of revenue.

In case of LTCG, the identical shall be taxable at 20%, plus relevant surcharge and cess. If it i s STCG, the identical shall be taxable at relevant slab charges of respective people, plus relevant surcharge and cess.

In case of LTCG from sale of residential property, following exemptions could also be availed by a person taxpayer, in direction of funding in specified property and fulfilment of all related situations:

Under part 54 of the Act: By investing the LTCG in buy or building of a brand new residential home located in India. Additional situations associated to interval of funding, quantity of funding, variety of properties already held, sale of latest asset, and many others. should be complied with.

Under part 54EC of the Act: By investing the LTCG in specified notified bonds (as much as a most of ₹50 lakh). Additional situations associated to the kind of asset, interval of funding, quantity of funding, sale of latest asset, and many others. must be complied with.

Parizad Sirwalla is associate and head, international mobility providers, tax, KPMG in India.

“Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!” Click right here!

Catch all of the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
Download The Mint News App to get Daily Market Updates.

More
Less

Updated: 15 Oct 2023, 10:35 PM IST