Inherited property tax: Long term asset eligible for reinvestment scheme under Section 54

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Updated: January 25, 2019 12:25 PM

Where land appurtenant (adjoining) to a residential house is sold, it may be termed as sale of house property and not land.

Inherited property tax, property tax, Section 54, taxability, CBDT circular no. 743, CBDT circular, tax, capital gain deposit, capital gainAlso, you will be eligible for reinvestment benefit under Section 54 if the property is a long-term asset. (Image: PTI)

I inherited a property from my father in September 2016. The property comprises a house and a small piece of land adjoining it. I have received an offer from a prospective buyer for the adjoining land. Accordingly, I am considering to sell that. What will be the taxability?
– Anuj Sabnavis
Where land appurtenant (adjoining) to a residential house is sold, it may be termed as sale of house property and not land. Further, it is important to note that for capital asset received by way of gift, will or inheritance, the cost of asset will be cost to the previous owner (in your case, cost in the hands of your father). Also, you will be eligible for reinvestment benefit under Section 54 if the property is a long-term asset (i.e., held for more than 2 years including the period of holding of your father) subject to fulfilment of conditions specified in Section 54.

My wife sold a residential house. She deposited the proceeds in capital gain account scheme under Section 54 to build a residential property in the plot of land so acquired. Last month, she died without fully utilising the amount in capital gain account scheme. Will I, as a legal heir, be taxed for the amount remaining unutilised?
– Prateek Gattani
The CBDT circular no. 743 dated 6-5-1996 has clarified that where a taxpayer makes a deposit in capital gain deposit account and dies before the expiry of the stipulated period, the said amount cannot be taxed in the hands of the deceased. This amount is not taxable in the hands of legal heirs also as the unutilised portion of the deposit does not partake the character of income in their hands but is only a part of the estate devolving upon them. As such, you won’t be taxed with respect to the inheritance of such unutilised amount.

The writer is founder of RSM Astute Consulting Group. Send your queries to fepersonalfinance@expressindia.com

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