Capital gains tax on inherited property: calculator with CII table

What is the cost of acquisition for inherited property?

Inheriting is not a sale, so you pay no tax when you inherit. When you sell, the cost is what the previous owner paid (section 49 of the old Act, section 73 of the Income-tax Act, 2025), plus improvements they or you made.

If the previous owner acquired it before 1 April 2001, you can use its fair market value on 1 April 2001 instead, if that is higher. For land and buildings that value cannot be more than the stamp duty value on that date. A registered valuer’s report is the usual evidence.

Your holding period includes the previous owner’s, so land bought by a grandparent decades ago is long-term even if you inherited it last year.

Can NRIs choose 20% with indexation instead of 12.5%?

No. Since 23 July 2024 long-term gains on land and buildings are taxed at 12.5% without indexation. For land or buildings acquired before that date, resident individuals and HUFs may pay 20% on the indexed gain instead, if that is lower. The law — section 197(3) of the Income-tax Act, 2025, earlier the proviso to section 112 — limits this to an individual or HUF ‘being a resident’, so NRIs pay 12.5% on the unindexed gain.

Residency is tested for the year you sell. If you move back to India and qualify as resident in the year of sale, the indexed option may become available — worth discussing with a CA before choosing a sale date.

How do you calculate the indexed cost of inherited property?

Indexed cost = cost × CII of the sale year ÷ CII of the year the cost relates to. For property held before 2001, use the 2001 value and the base CII of 100. Courts (for example the Bombay High Court in Manjula J. Shah) have allowed the previous owner’s year, not the year you inherited, to be used for indexation; the tax office has sometimes argued otherwise.

Worked example (resident): your father bought land in 1995; its value on 1 April 2001 was ₹10 lakh. You sell in 2026-27 for ₹1.2 crore with ₹1 lakh of costs. Plain gain = ₹1.19 crore − ₹10 lakh = ₹1.09 crore, so 12.5% = ₹13,62,500. Indexed cost = ₹10 lakh × 384 ÷ 100 = ₹38.4 lakh; indexed gain = ₹80.6 lakh, so 20% = ₹16,12,000. The 12.5% route is lower here. As an NRI, the tax is ₹13,62,500 plus 15% surcharge and 4% cess = ₹16,29,550.

Indexation wins when the property was acquired more recently. A resident selling for ₹60 lakh land bought in 2010-11 for ₹30 lakh has an indexed cost of about ₹69 lakh (₹30 lakh × 384 ÷ 167), so the indexed gain is nil and so is the tax, against ₹3.75 lakh plus cess at 12.5%.

What is the latest Cost Inflation Index (CII) table?

CII for 2026-27 is 384 (CBDT Notification 85/2026, July 2026). Earlier years: 2001-02: 100, 2002-03: 105, 2003-04: 109, 2004-05: 113, 2005-06: 117, 2006-07: 122, 2007-08: 129, 2008-09: 137, 2009-10: 148, 2010-11: 167, 2011-12: 184, 2012-13: 200, 2013-14: 220, 2014-15: 240, 2015-16: 254, 2016-17: 264, 2017-18: 272, 2018-19: 280, 2019-20: 289, 2020-21: 301, 2021-22: 317, 2022-23: 331, 2023-24: 348, 2024-25: 363, 2025-26: 376.

How can you reduce capital gains tax on inherited property?

Section 54EC of the old Act (section 85 of the new Act): invest up to ₹50 lakh of the gain in specified bonds within 6 months of the sale; they are locked in for 5 years. Section 54F (now section 86): if you sold land, reinvest the net sale proceeds in one residential house in India within the time limits. Section 54 (now section 82) does the same if what you sold was a house. The house exemptions are capped at ₹10 crore of gain.

NRIs can use these too, but a certificate or proof of reinvestment is often needed before the buyer will reduce TDS. Plan them with a chartered accountant before the sale, not after. Rates and CII values here were last checked on 24 Sept 2026.