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What is the cost of acquisition in case of gift

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manohara

student

82 Points Posted on 07 August 2013

Hi Friends,

i have a doubt regarding cost of acquistion in the hands of the assesse

Mother Transferred land as gift to daughter under a gift deed as on 01/05/1999 value mentioned in the gift deed was Rs. 195000/- and later on on 26/05/2012 the daughter(Assesse) sold it for Rs. 39,00,000/-

mother had purchased the same in the year of 1979 and the value is not known as there are no documents regarding the purchase.

The assesse never filed return of income ever before. And Assesse gifted the sale consideration to his younger son.

The assesse is already have two house properties in her name.

The younger son with his brother purchased another house.

my doubts are

what is cost of acquistion

what is the capital gain

what are the exemption which the Assesse can claim.

any other tax planning Route.

Thanks in Advance

Manohar

nachiketha @ mail.com

Replies (1)

Mihir

Wealth Manager

5293 Points Posted on 07 August 2013

Mother purchased the property on 1979

Mother gifted the property to her daughter on 1999 for Rs. 195,000/-

Daughter sold the property on 2012 for Rs. 39,00,000/-

In this case, the cost of acquisition for the daughter shall be the cost of acquisition for the previous owner (mother). The mother is required to determine the market value of the property as on 1-4-1981.

I am assuming the market value shall be around Rs. 50,000/- as on 1/4/1981. (reverse indexing)

So the computation for LTCG shall be hereunder:

Sale value: Rs. 39,00,000/-

Less Cost of indexation: 426,000/-

Long term capital gain = Rs. 34,74,000/-

Long term capital gain tax = Rs. 707,306/-

Now if the daughter wants to pay Nil tax, she need to invest Rs. 34 lacs in another property or buy infrastructure bonds. She will have to file ITR returns but before that she needs to invest in another property or buy bonds. Gifting the sale proceeds to her son is not an exemption.