Capital Gain on Gift, Will or Inheritance

Rukmani Gupta Dec 25, 2019 2141 0

Capital Gain on Gift, Will or Inheritance

What is the period of holding for calculating capital gain in case asset is acquired other than by purchase?
What will be the capital gain in case we receive any asset way of inheritance / will/ gift?

1. What is the period of holding for calculating capital gain in case asset is acquired other than by purchase?

Following are the provisions for calculating period of holding in case asset is acquired other than by way of purchase

1. In the situation where asset is acquired by way of gift , the period of holding for calculating capital gain is counted from the date previous owner acquired / constructed the same.

1. In the case where asset is acquired by way of inheritance or by will, the period of holding for calculating capital gain is counted from the date previous owner acquired / constructed the same.

1. In case of bonus or right shares, the period of holding for calculating capital gain starts from the date of allotment of bonus or right shares.

2. What will be the capital gain in case we receive any asset way of inheritance / will/ gift?

The transfer of any asset by way of Gift/ Inheritance / Will is not treated as a taxable transfer under section 47 of Income tax Act. And since no sale proceeds are involved with these transfer, no capital gain will arise due to any such transaction.

But when the receiver of gift/ will / inheritance further sell these assets for a consideration, then the following provisions will apply:-

1. 1. The period of holding for the purpose of computing capital gain would start from the day original owner purchased or acquired it.
  2. The cost of acquisition would be the original cost incurred by the original owner for purchasing/ constructing /acquiring the same.
  3. The cost of any improvement done by original owner would also be considered from the year it has been incurred.
  4. Any legal cost incurred for executing will/ gift deed/ cost of attorney would be allowed as cost of transfer without indexation.