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Figuring the cost basis for inherited assets in India and the USA

Cost Basis 2Cost Basis of property as per USA tax law


While you may not have to pay inheritance taxes, you should know the cost basis of what you inherit. If you inherit a house in India worth 200,000 US$ and the fair market value of the house the date of death is the same, then this is your cost basis. This means that if you sell the house for 200,000 US$ you will pay no taxes in the USA. You may even take a loss if there were costs of sale and the home price did not cover them beyond the basis. This calculation is the same whether you inherit real estate, other physical assets or financial accounts.


In times of financial turbulence such as a market that is going sharply down or up, you may want to choose the option to select the “Alternate Valuation Date”, or the cost basis 6 months after the date of death (DOD). This does not apply to all types of assets, but can be used with many.


Determining the Cost Basis in India of a property


If the property was bought by the previous owner before April 1, 1981 then Fair Market Value (FMV) as on April 1,1981 is the cost, which again is inflated by applying the Cost of Inflation Index (CII) applicable for the relevant year of the transaction. Indian Revenue Authorities publish CII for each year.


If the property was bought by the previous owner on or after April 1, 1981 then the actual cost incurred by the previous owner will form the cost basis of an inherited property, which again is inflated by applying the CII applicable for the relevant year of the transaction.


You may want a qualified accountant to help you through these calculations which can be complex.                   


The author, Ariadne Horstman, is a financial planner at InvestmentYogi.

Published Mar 16 2011




D.Mukherjee said:

How computation will come to assess fair market value on 01.04.1984,as my inherited property is located at Serampore,Dist.-Hooghly in west bengal.Kindly help me separately the value of land & the construction therein please.

August 22, 2011 10:31 AM

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