My father gifted separate flats to my siblings and me. What tax will I pay if I sell mine?

Selling a flat can lead to tax liability, even if it was originally gifted to you by your parents. Depending on the holding period, gains in such transactions will be taxed either as short-term or long-term. Today's Q&A explains these rules in detail in response to a reader's query.

Section 54F provides for an exemption to an individual and an HUF from long-term capital gains arising on the sale of a capital asset other than a residential house property if the net sale proceeds are invested for acquiring a residential house property, within the prescribed time period. For self-constructing or booking an under-construction house property, the prescribed time period is three years, within which the construction needs to be completed from the date of transfer of the capital asset.

Since the chargeability of capital gains for the transfer of land for redevelopment and completion of the construction arises in the same financial year, your father is prima facie eligible to avail the exemption under section 54F as he is transferring his proportionate right in the land in exchange for the construction of three floors.

If the newly acquired residential house property for claiming the exemption is transferred within three years, the exemption claimed under section 54F gets reversed in the year of such transfer. However, the transfer made by an individual under a gift or a will is not treated as a transfer under section 47(iii), so the long-term capital gain exemption will not be reversed.

For capital assets, which are acquired as a gift, the cost to the previous owner, who had bought it, is taken as the cost of such person for capital gains purposes. So the stamp duty value of the flats on the date of getting possession will be your cost if you sell the same.

Since you are selling the same within two years, the difference between the cost and the sale price will be taxed as short-term capital gains and taxed at the slab rate applicable to you.

If you sell the flat after two years, the profits will be taxed at a concessional rate of 12.50%. You also get the option to save capital gains by acquiring another residential house and/or by investing in capital gain bonds of specified financial institutions.