What will be the tax implication on gift received from NRI?

I constructed a new house using my savings after demolishing the old house that was built by my father in parts in 1971 and 1979. The construction took place in 2014 on a plot that was originally in my father’s name. In 2016, after the completion of the construction, my mother gifted the house to my NRI daughter. Now, in 2023, my daughter intends to gift the house back to me, and I plan to sell it as soon as possible. I would like to know the capital gains tax implications for me upon selling the house.

—Name withheld on request

Your father seems to be the original owner of the property. Kindly note that it is not clear how your mother came into possession of the house. It is assumed that the house was willed or gifted to her.

For the calculation of capital gains, the date on which your father became the owner of the property shall be considered for the purpose of indexation of cost and calculation of capital gains.

You shall be allowed to reduce the indexed cost of acquisition from the selling price. You can also consider the cost of improvement made and index that according to the year in which the improvement was made and reduce it from the sale price to arrive at capital gains.

Your capital gains shall be taxed at 20% after indexation. You are allowed to save tax on these capital gains, by either investing them to purchase a new house or buying capital gains bonds or you may deposit the money in a capital gains account scheme and comply with the stipulations so that you can claim an exemption from tax on capital gains.

Archit Gupta is founder and chief executive officer, Clear.in

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