Tax
Capital Gains Tax on Sale of Inherited Assets
Article
How LTCG and STCG apply when you sell inherited property, shares, or other assets.
Published: 3 Apr 2026 · Updated: 2 Oct 2026
Key points
- Inheriting an asset is not taxed; selling it later can be.
- Your cost and holding period both start from when the previous owner acquired the asset, so most inherited assets count as long-term.
- For assets bought before 1 April 2001, the fair market value on that date can be used as the cost.
- Long-term gains on listed shares and equity funds above ₹1,25,000 a year are taxed at 12.5%; short-term gains on them at 20%.
- Buying another house (old section 54) or investing in specified bonds (old section 54EC) can save tax on gains from property.
When you sell an inherited asset, capital gains tax applies. The key difference from regular capital gains is how the cost basis and holding period are calculated. For inherited assets, you step into the shoes of the previous owner for both. The inheritance itself is not taxed; see the tax reality of inheritance in India.
Holding period: The period starts from when the original owner acquired the asset, not when you inherited it. If your mother bought shares in 2010 and you inherited them in 2024, the holding period for capital gains purposes is from 2010. This almost always qualifies as long-term, which means lower tax rates.
Cost basis: your cost is what the previous owner paid for the asset. For assets bought before 1 April 2001, you can use the fair market value on 1 April 2001 instead; for land and buildings that value can't be more than the stamp duty value on that date. Indexation was removed for sales from 23 July 2024, with one exception: for land or buildings acquired before that date, a resident individual or HUF can pay the lower of 20% with indexation or 12.5% without. How this applies to inherited property is worth checking with a CA.
For listed shares and equity mutual funds, long-term capital gains above ₹1,25,000 in a financial year are taxed at 12.5%. For property and other assets, long-term gains are taxed at 12.5% without indexation, subject to the land-and-building option above. Short-term gains on listed shares and equity funds are taxed at 20%.
Tax-saving options: if you sell an inherited house, you can claim exemption by buying or building another residential house within the set time limits (old section 54, now section 82). Gains from land or buildings can also be saved by investing up to ₹50 lakh in specified bonds within 6 months of the sale (old section 54EC, now section 85). Planning these before the sale can save significant tax.
General information, not legal, tax or financial advice. Laws and rules change, so check with a qualified lawyer or CA before you act.
