How to calculate capital gains on inherited property in India (2026 update)

When you inherit a property in India and sell it, the Income Tax Act treats the holding period and acquisition cost from the original owner — not from when you inherited. That's the key fact that confuses most first-time inheritors.

Step 1 — Find the original date of acquisition

If your parent or grandparent bought the property before 1 April 2001, you can use the Fair Market Value (FMV) as on 1 April 2001 as the cost of acquisition instead of the original purchase price. This is the single most important rule, because property prices in India have risen 8–15x since 2001 — using the actual 1990s purchase price would balloon your tax bill.

Step 2 — Get a Govt-Registered Valuer FMV report for 1 April 2001

The Income Tax Department will accept a Fair Market Value certificate as on 1 April 2001 only if it's signed by a Form N Registered Valuer (under Wealth Tax Act Section 34AB). This is what Proprify issues. Express 48-hour Mumbai/Delhi/Bangalore/Hyderabad/Pune/Chennai delivery.

Step 3 — Apply the indexation benefit (long-term capital gains)

If your total holding period (original + inherited) exceeds 24 months, the sale qualifies as long-term capital gains (LTCG) at 12.5% (post-2024 Finance Act, without indexation) or 20% with indexation — whichever is lower for you.

Step 4 — File ITR with the gain

Capital gain = Sale price – (FMV as on 1 April 2001 + improvement costs + transfer charges). Report under Schedule CG of ITR-2. Keep the Valuer report ready — assessing officers ask for it during scrutiny.

Common mistakes

• Using your inheritance date instead of the original owner's purchase date for the holding period.
• Using a circle-rate guideline value as FMV (the IT Department rejects this — Form N report required).
• Forgetting to claim improvement costs (renovations, additions made by the original owner with proof).
• Missing the Section 54 exemption — you can re-invest in another house within 2 years and pay zero tax.