How do gifts and inheritance impact Capital Gain tax calculations?

In India, gifts and inheritance can have certain implications on Capital Gain tax calculations. Let's look at the scenarios separately:

1. Gifts: If you receive a gift, such as a property or any other asset, the transfer itself does not trigger any immediate Capital Gain tax liability. However, if you decide to sell the gifted asset in the future, the Capital Gain tax will be calculated based on the original cost of the asset to the previous owner (i.e., the person who gifted it to you) and the period for which the previous owner held the asset. This is known as the "cost of acquisition" for the purpose of calculating Capital Gains.

2. Inheritance: In the case of inheritance, when you inherit an asset, such as a property or shares, the cost of acquisition for the purpose of calculating Capital Gains is considered to be the fair market value of the inherited asset as of the date of inheritance. This means that if you later decide to sell the inherited asset, the Capital Gain tax will be calculated based on the difference between the selling price and the fair market value as of the date of inheritance.

It's important to note that any subsequent increase in the value of the gifted or inherited asset from the date of gifting or inheritance until the date of sale will be considered as your Capital Gain, subject to tax as per the applicable rates and provisions.

It's recommended to consult with a tax professional or refer to the Indian tax authorities for specific guidelines and rules related to gifts, inheritance, and their impact on Capital Gain tax calculations, as there may be additional considerations and exemptions depending on the nature of the asset and the relationship between the parties involved.