India, March 29 -- The cost of acquisition for inherited properties is generally the cost at which the previous owner acquired the property. However, if the previous owner purchased it before 1 April 2001, the inheritor can opt to use the fair market value (FMV) of the property as of 1 April 2001 instead.

"This provision, often applicable under Indian tax law (e.g., Section 49 of the Income Tax Act), allows the inheritor to account for appreciation in value up to 2001. By choosing the FMV as of 1 April 2001, which is typically higher than the original cost, the inheritor can reduce the taxable capital gains when selling the property and apply the indexation benefits," says Manmeet Kaur, Partner at Karanjawala & Co, a litigation firm.

An...