Capital gains from property received by gift are calculated based on the cost of acquisition by the previous owner, as per Section 49(1) of the Income Tax Act.

2) The holding period of the previous owner is also considered when determining whether the gain is short-term or long-term.

3) it would attract long term capital gains tax 

4) she can reinvest capital gains in purchase of another property within period of 2 years 

Your mother-in-law may be liable for capital gains tax if she decides to sell the property, as the sale of property typically triggers tax implications. The capital gains tax depends on whether the property is considered a short-term or long-term capital asset. Since the property was transferred to her less than two years ago, it will be considered a short-term capital asset. In such cases, the capital gain is calculated based on the difference between the sale price and the cost of acquisition (which would be the cost at the time of the gift, i.e., the value of the property when her brother acquired it—₹5 lakh). The capital gains will be taxed at a rate of 15% for short-term capital gains under Section 111A of the Income Tax Act.

If she reinvests the proceeds in another property, she may be eligible for exemptions under Section 54 of the Income Tax Act, where the capital gains are exempted if the entire amount is reinvested in the purchase or construction of a new residential property. This exemption is subject to the amount of capital gains, and the reinvestment should be done within a specified time frame (usually one year from the sale or within two years for purchase or three years for construction).

Even if she doesn't have any other source of income, she will still need to pay taxes on the capital gains unless she qualifies for exemptions by reinvesting the proceeds. Additionally, old age does not provide any exemption for capital gains tax. However, senior citizens may benefit from a higher exemption limit in other income tax provisions, but that does not directly apply to capital gains tax in this scenario.

It's recommended that she consult a tax professional or a lawyer to evaluate her specific case in detail, including the reinvestment options available to her, as tax laws can be complex.

Thanks and Regards,

Advocate Aman Verma,

Legal Corridor.

As the  property is held for less than 36 months short term capital gain tax is applicable. Capital gain earned will be added to her income and than tax will be calculated on the  tax bracker in she falls.

Under Section 54 of the Income Tax Act she is entitled  to tax exemption on profit earned if that entire profit amount is used to buy another house. She can buy a new house within 2 years from the date of sale of his previous property or construct a new house within 3 years from the date of sale. 

Under Section 54 EC she is entitled for tax exemption if the entire capital profit is invested in bonds issued by NHAI that is National Highway Authority of India or REC which is Rural Electrification Corporation. There is a limit to exemption under Section 54 EC and is Rs.50 lakh.

In case she can’t find the right property to buy and is unable to come up with a concrete plan in 2-3 years, she still can save tax on the capital profit earned. This can be achieved by investing gains in the Capital Gains Accounts Scheme (CGAS) in any public sector bank. This amount can then be claimed for tax exemption. However, she is required to invest this money within the period stated by the bank else the deposit is treated as capital gain and tax is deducted on it. 

If she has not got any notice she can relax otherwise she has to pay capital gain tax only if she earns any income from the same

Your mother is liable to pay the long term capital gains tax from the period of the purchase of the owner who transferred the property by gift deed to your mother in law.

She can of course avail tax benefits by buying another property out of the sale proceeds of this property under section 54 of IT act