Need Help With Capital Gains Tax?

If you are selling a gifted property, proper tax calculation is important to avoid income tax notices.

CA Shiwali – Chartered Accountant in South Delhi helps with:

✔ Capital Gains Tax Planning
✔ Property Sale Tax Calculation
✔ Lower TDS Certificate for NRI Property Sale
✔ Capital Gains Exemption (Section 54 / 54F)
✔ Income Tax Return Filing

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Capital Gains on Gifted Property in India – Complete Guide

When you sell a property received as a gift, capital gains tax is calculated differently from a normal property purchase.

Under Section 49(1) of the Income Tax Act, the cost of acquisition of gifted property is considered as the cost paid by the previous owner.

This means the original purchase price of the person who gifted the property is used for tax calculation.

Important Tax Rules for Gifted Property

1. Cost of Acquisition Rule

If your father purchased a property in 2005 for ₹10 lakh and later gifted it to you, then:

Your cost of acquisition = ₹10 lakh

Not zero.

2. Holding Period Rule

The holding period of the previous owner is also counted.

Example:

Father purchased property in 2008
You sell it in 2025

Holding period = 17 years

So it becomes Long Term Capital Gain (LTCG).

3. Indexation Benefit Available

For long-term capital gains, you can apply indexation benefit to reduce taxable profit.

Indexation adjusts purchase cost according to inflation using the Cost Inflation Index (CII).

Example Calculation

Let’s understand using a simple example.

Father purchased property in 2006 for ₹8,00,000

You sell the property in 2025 for ₹75,00,000

CII values:

2006-07 = 122
2025-26 = 376

Indexed Cost =

8,00,000 × (376 / 122)

≈ ₹24,65,573

Capital Gain:

75,00,000 – 24,65,573

≈ ₹50,34,427

Tax at 20% LTCG rate

≈ ₹10,06,885

Your calculator will automatically compute these values.

Capital Gains Tax Saving Options

If you sell a gifted property, you can reduce or avoid tax using:

Section 54 – Buy Another House

If you invest capital gains in another residential property, tax exemption is available.

Capital Gains Account Scheme (CGAS)

If you cannot immediately invest, you can deposit funds in CGAS to claim exemption.

Section 54EC Bonds

Investment in capital gains bonds (NHAI / REC) within 6 months.

When Gifted Property is NOT Taxable

Receiving property as a gift is not taxable when received from:

• Parents
• Spouse
• Brother / Sister
• Lineal ascendants or descendants
• Relatives defined under Income Tax Act

However, tax applies when the property is sold.

Frequently Asked Questions (FAQs)

Is capital gains applicable on gifted property in India?

Yes. Capital gains tax applies when you sell the gifted property, not when you receive the gift.

What is the cost of acquisition for gifted property?

The cost of acquisition is considered as the purchase price paid by the previous owner, as per Section 49(1).

Can indexation benefit be claimed on gifted property?

Yes. If the property qualifies as long-term capital asset, indexation benefit can be applied using the previous owner’s purchase year.

Is holding period of previous owner counted?

Yes. The holding period of the previous owner is added to your holding period to determine whether the gain is long term or short term.

What is the capital gains tax rate on gifted property?

If held for more than 24 months, it is taxed as Long Term Capital Gains at 20% with indexation.

Consult CA Shiwali for Capital Gains Tax

If you are selling:

✔ Gifted property
✔ Inherited property
✔ Joint property
✔ NRI property in India

• Capital Gains Calculator
• Income Tax Calculator
• Section 54 Calculator
• NRI Tax Guide
• Contact Page

Professional tax planning can help reduce your tax liability significantly.

CA Shiwali – Chartered Accountant

📞 Call / WhatsApp: 9266032777