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My father had purchased a house in 1995. He passed away in 2009. We are three brothers who inherited the house equally. I bought share of one brother in 2013 and share of other brother in 2014. Now I have become owner of the full building. How the capital gains would be computed if I sell the full building in current year?
In respect of assets acquired through gift or inheritance, the cost of acquisition for the taxpayer is the cost for which the previous owner who had paid for it had paid. So for your 1/3 share acquired by you through inheritance your cost would be the proportionate cost paid by your father. For the assets acquired before 1st April 2001 the tax payer is entitled to substitute the fair market value of the asset as on 1st April 2001.
Since the house was acquired prior to this date you have the option to take the fair market of 1/3 share in the house as on 1st April 2001 for computation of capital gains. For ascertaining the fair market value of the house on 1st April 2001 you have to obtain a valuation report from a registered valuer. Under no circumstance the fair market value of the property can be higher than the circle rate or stamp duty rate.
Though the law provides for the benefit of indexation from the date when you became owner of the property but various Income Tax Tribunals have allowed the indexation benefit from the date when the previous owner who paid for it acquired it. So you can safely apply cost inflation index to fair market value of the house for your 1/3 share from 1st April 2001.
As far as the cost and indexation for the remaining 2/3 share in the house is concerned, your cost of acquisition will be the amount paid by you and the benefit of indexation will apply from the year in which you acquired the respective shares in the property.
Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on Twitter