• Exemption on sales of ancestral property

My grandfather has a property and he owned in the year 1935. Before his death he made a will duly mentioned that all his properties shall be borne by his grandchildren after the demise of his son (our father) and we acquired all the properties as per the will condition.  After my father's demise we made settlement internally (division thro' registered deed).  Now my clarification is if i sell one of my property shall i claim IT exemption on the amount received. or is there any limit?

I await for your detailed clarification pl.,
Asked 2 years ago in Property Law from Vellore, Tamil Nadu
Religion: Hindu
1)When a property is received on inheritance  it is not taxable for the receiver. When the inheritor  of property, sells it, capital gains on the sale are taxable for the inheritor.

2) The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the Property.

3) Additionally, the year of acquisition of the previous owner ie 1935  is considered for the purpose of indexation of the cost of acquisition.

4) in your case the cost of calculating your gain would the cost of purcasing property in 1935 by grand father and cost shall be indexed as it is long term capital gain 
Ajay Sethi
Advocate, Mumbai
44340 Answers
2575 Consultations

5.0 on 5.0

Capital gains tax will apply for all transactions. Date of acqusition of property will be construed as date on which property partition deed was registered in your favour. Also we need to know what are you going to do with sale proceeds( ex. You can buy a residential house and claim tax exemption for full amount invested). Speak to your chartered accountant who has visibility on your income tax payment history and your current annual income.
Rajgopalan Sripathi
Advocate, Hyderabad
1267 Answers
155 Consultations

5.0 on 5.0

What you have been informed is not true. Furthermore, if the property was originally purchased by your grandfather then it is not ancestral in first place.
Ashish Davessar
Advocate, Jaipur
22966 Answers
631 Consultations

5.0 on 5.0

Please remember that the  property is regarded as a capital asset and any gains arising from its sale is taxable as 'Capital Gains' under the Income Tax Act 1961. If the property is held for less than three years prior to its sale, it is termed as a short-term capital asset and any gain arising from the sale is treated as a short-term capital gain. But if the property is sold after a holding period of more than three years, it is to be treated as a long-term capital asset and a gain arising from its sale is assessed as long-term capital gains.
While short-term capital gains on sale of property is taxable per slabs rates applicable to the individual, long-term capital gains are taxable at a flat rate of 20%. However, under Section 54 of the Act, the seller can claim exemption from capital gains arising out of sale of the house to the extent the capital gains are invested in another residential property subject to fulfilment of the following conditions:a) the new residential house is purchased either one year before or two years after the date of sale or constructed within three years from the date of sale and b) the new property purchased should not be transferred within three years of purchase.
T Kalaiselvan
Advocate, Vellore
34510 Answers
372 Consultations

5.0 on 5.0

I have been informed that any ancestral property belongs prior to Independence shall claim IT exemption.
Need your suggestion on this too.

There is no such provision. Any property with a document shall have the purchase and registration details, Based on the purchase value a that time and the present value and after division of properties into number of shares, the sale consideration received shall be taken up for tax exemption depending on the nature of tax i.e., short term or long term.for calculating capital gains tax.
T Kalaiselvan
Advocate, Vellore
34510 Answers
372 Consultations

5.0 on 5.0

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