Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Cost steps into the previous owner's shoes
When you sell inherited property, your cost of acquisition is what the person you inherited from paid for it — not its value on the date of inheritance. If they acquired it before 1 April 2001, you may instead use its fair market value as on 1 April 2001. Inheriting itself is not taxed; only the sale is.
Holding period and rate
The holding period includes the previous owner’s, so an inherited property is nearly always a long-term asset — taxed at 12.5% for transfers from 23 July 2024. The indexation/12.5% options changed in 2024 — confirm which applies to your sale.
A worked example
Example: your father bought a flat in 1995 for ₹8 lakh; you inherit it in 2018 and sell in 2026 for ₹1.2 crore. Your cost is the 1 April 2001 fair value of the flat (say ₹15 lakh), and the gain is computed from there as long-term. The buyer still deducts Section 195 TDS, and you can cut it with a Section 197 certificate and save tax under Section 54/54EC. One document worth keeping is proof of the original owner’s purchase (or its 2001 value) — without it, establishing your cost of acquisition years later is difficult, and a higher assessed gain means more tax. Our NRI property service can compute and plan it.