If we sell or develop land transferred to my brothers by my grandfather, how will LTCG be taxed?

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My grandfather and his brothers had purchased some land, which had been held in a private family trust. This was dissolved five years ago through a registered deed. The property was then transferred to all the grandsons equally. Now, if we decide to sell the land or develop it for sale, how will the long-term capital gains (LTCG) be calculated and taxed?

Rajat Dutta Founder & Initiator, Inheritance Needs Services: Since the property was held in a private family trust, which was dissolved five years ago, and was bought before 23 July 2024, the beneficiaries can choose between two methods to calculate the long-term capital gains (LTCG). One, they can use the original acquisition cost at the time the property was seeded into the trust (using revenue records if market value is unavailable), with LTCG taxed at 12.5% for each beneficiary’s share. Alternatively, they can adopt the fair market value as on 1 April 2000, apply indexation, and pay 20% LTCG tax on the indexed gains. The same tax treatment applies if the land is developed and transferred partly in kind, such as through builtup units.


My great-grandfather bought a plot of land near Mumbai in the 1940s, which has been passed down without division. It is now being split into three parts, with my father receiving one-third. If he sells his share, how will the cost of acquisition be determined since the original purchase price is unknown, and what will be the LTCG implications?

Vikash Jain Co-founder, Share Samadhan: If your great-grandfather bought the land in the 1940s and the original cost is unknown, the cost of acquisition will be the fair market value (FMV) as of 1 April 2001, which a registered valuer can determine. Your father’s one-third share will be based on this value, and any capital improvements made after 2001 can be added and indexed using the Cost Inflation Index (CII). Since the land qualifies as a long-term asset, the tax liability will be on long-term capital gains (LTCG). For properties acquired before 23 July 2024, your father can either pay 12.5% tax without indexation or 20% with indexation (CII for 2024–25 is 363, with 100 as the base for 2001–02). For example, if the 2001 FMV is Rs 90 lakh and his share is Rs 30 lakh, selling it for Rs 1 crore with Rs 2 lakh expenses would result in no tax with indexation, but a tax of about Rs 8.5 lakh without indexation. He can also reinvest the gains in a residential house property as per Section 54 of the Income Tax Act, or in REC/NHAI bonds under Section 54EC, or park the amount in a capital gains account until reinvestment.

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