Gifting and Inheriting Property — Two Specific Certificate Requirements
Property received through a gift and property received through inheritance can involve different valuation dates, tax rules and documentation requirements. Understanding the applicable FMV certificate before the transaction or subsequent sale can help establish a clear valuation record.
Get Expert Advice →Gift and Inheritance Are Not the Same Valuation Situation
The relevant valuation requirement depends on how the property came to you. A gift can raise questions about the property's fair market value for the recipient, while inheritance involves establishing the appropriate cost basis and valuation record for the inherited property.
Section 56(2)(x) & Rule 11U
Establish the relevant FMV where property is received as a gift and the applicable tax provisions require valuation evidence.
Section 49 & Section 55(2)(b)
Establish the appropriate valuation record and relevant cost basis for property inherited from a previous owner.
Gifting Property — Section 56(2)(x) and Rule 11U
When property is received as a gift from a person who is not a relative as defined under the Income Tax Act, the fair market value of the property can become relevant under Section 56(2)(x) where the applicable threshold and conditions are met.
Gifts received from specified relatives, including a spouse, parents, siblings and their spouses, children and their spouses, and specified lineal ascendants and descendants, are treated differently under the provision. The exact relationship and circumstances should therefore be established before determining the tax treatment.
A professional valuation can establish the relevant fair market value of the gifted property for documentation and applicable tax reporting.
₹80 Lakh Gift From a Non-Relative
Where the applicable provisions treat the full ₹80 lakh FMV as taxable in the recipient's hands, the valuation certificate provides documented evidence of the property's relevant FMV for the recipient's tax records.
For specialist gift valuation information and resources, visit giftvaluation.com .
Establish the Right Valuation Record
Identify the Relationship
Establish whether the donor falls within the specified relative categories under the applicable provision.
Establish FMV
Determine the relevant fair market value using appropriate valuation evidence.
Preserve Documentation
Maintain the valuation certificate and supporting property records for the relevant tax documentation.
Inheriting Property — Estate FMV and Section 49
When you inherit property from a parent, spouse or other relative, the property is generally subject to the applicable Section 49 cost-basis rules. The heir's cost of acquisition may therefore be linked to the cost at which the previous owner acquired the property.
For an older property, this can mean that the original purchase price dates back to the 1970s or 1980s. When the heir eventually sells the property, the applicable provisions concerning property acquired before 1 April 2001 can become particularly important.
Where the original property was acquired before 1 April 2001, the heir may be able to use the applicable FMV as on 1 April 2001 as the cost basis when the property is eventually sold, subject to the applicable law and facts.
This makes a contemporaneous estate valuation particularly useful. The valuation record can establish the property's FMV at the date of death and, where applicable, the relevant 2001 FMV for an older property.
Get Expert Advice →Why a Contemporaneous Valuation Matters
A valuation prepared around the relevant estate date can create a documented record of the property's condition, location, characteristics and market evidence at that point in time.
Establish Your Property's Valuation Record
Whether the property has been gifted to you or inherited, understanding the relevant valuation date, FMV and cost-basis documentation can help you prepare for the next stage of ownership or eventual sale.
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