Q691. Inherited property capital

gains indexing calculation for NRI

Question: Sir, I am an NRI in USA, and have two questions. 1. Example: Father builds property for 1 lakh in 1984, and passes away in 1990. Son inherits it in 1990, and sells it in 1995, for 5 lakhs. Question: Indexing of the 1 lakh is between 1984 and 1995, or 1990 to 1995? 2. For the above property, can one pay 10% without indexing. Will appreciate the advise. Jay Koshal Answer: Regarding your questions: 1. While some are of the view that the cost of indexation when inherited property is sold should be calculated using the year of inheritance, there are reports that courts have taken the view that indexation benefit can start from the year in which person from whom the property is inherited acquired the property. Check with your accountant for clarification. Here is a link to an article you may find interesting: https://www.bcasonline.org/articles/artin.asp?7 57 Here is an excerpt from the article: 3.5 The Tribunal observed that if, for the purposes of determining the period of holding by the assessee, the period for which the asset was held by the previous owner is included, then different considerations could not be applied for the purpose of S. 48. It noted that the scheme of taxation with respect to inherited assets was that where an assessee sold an inherited capital asset, the capital gain was computed with reference to the period of holding and the cost of acquisition incurred by the previous owner, since inheritance or succession was not regarded as a transfer. 2. Paying tax at 10% without indexation is not available in the case of immovable property. The 10% provision is only for financial assets such as mutual funds etc. o The rate of tax on long-term capital gains currently works out to 20.6%