Inherited Assets — Your Capital Gain Starts From Your Parent’s Cost
When you inherit property, jewellery, or art from a parent or other relative, you do not pay any inheritance tax in India (India abolished estate duty in 1985). But you are not entirely free from tax: when you eventually sell the inherited asset, the capital gain you pay is computed from the cost that the deceased paid for it — or, if the deceased acquired it before 1 April 2001, from the FMV as on 1 April 2001 under Section 55(2)(b).
The Government Approved Capital Gain Valuer’s certificate serves two purposes in the inheritance context: it establishes the estate’s asset values at the date of death; and it provides the Section 55(2)(b) base value that each heir will use as their cost of acquisition for future capital gain.
Get Expert Advice +91-9999992343The Inherited Holding Period
You do not start counting the holding period from the date of inheritance.
For capital gain classification, the inherited asset’s holding period includes the period it was held by the deceased. So if your father held a flat from 1975 to his death in 2024 (49 years), and you inherit it and sell it within 6 months of inheriting, the holding period is still 49+ years — qualifying for long-term capital gain treatment. You do not start counting from the date of inheritance.
Why a Contemporaneous Estate Certificate Matters
The estate certificate produced at the time of inheritance — not retrospectively when you decide to sell years later — is the most defensible foundation for your capital gain position.
A Government Approved Valuer’s certificate produced within a year of the inheritance, establishing the FMV of each asset at the date of death, is contemporaneous evidence that an Assessing Officer reviewing your capital gain return 10 years later will respect.
A retrospective certificate produced years after the inheritance, trying to establish what things were worth at a past date, is inherently less defensible — even if the values are identical. A2Z Valuers strongly recommends commissioning the estate valuation at the time of inheritance rather than at the time of eventual sale.
Value at Date of Death
Establish the FMV of each inherited asset while the inheritance event is contemporaneous.
Preserve the Cost Basis
Create a defensible foundation for the heir’s future capital gain computation.
The HUF Partition Situation
Where a Hindu Undivided Family (HUF) is partitioned and its assets — property, jewellery, family business — are distributed among the members, each member’s cost of acquisition of the assets they receive is the cost in the HUF’s hands — with the same Section 55(2)(b) availability for pre-2001 HUF assets.
A Government Approved Capital Gain Valuer’s certificate for the HUF partition serves the same function as the estate certificate: establishing each member’s cost basis for their future capital gain position on the assets distributed to them.
Establish the Right Capital Gain Cost Basis Before You Sell
A properly documented valuation can establish the date-of-death FMV, support the applicable Section 55(2)(b) base value, and create a defensible foundation for your future capital gain computation.