Hungarian Tax Authorities Clarify Indexation Benefits for Inherited Property Sales

Capital Gains Tax on HUF Property: Understanding the Acquisition Date

A property originally owned by a larger Hindu Undivided Family (HUF) was divided among three smaller HUFs after a division in 1995. One of the smaller HUFs sold its share in February 2026. This raises questions about which acquisition date matters for capital gains calculation and when the indexation benefit can be claimed.

The Hindu Succession Act of 1956 plays a crucial role in determining the ownership of the property. According to the Act, the share received by each coparcener and member on partition of the HUF represents their personal asset. Since the HUF was partitioned after June 17, 1956, the partitioned assets should have gone to the respective coparceners as their personal assets.

For calculating capital gains tax, the profits on sale are treated as long-term capital gains (LTCGs) if the property has been held for more than two years by the HUF. In this case, the property was acquired before April 1, 2001, and the fair market value of the property as on that date can be taken as the cost of the HUF for computing capital gains. The fair market value can be obtained from a registered valuer or by using the circle rate or stamp duty rate available for April 1, 2001.

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Taxpayers have the option to compute LTCG tax at either 12.5 percent (plain) or 20 percent (with indexation), whichever is lower, for land or buildings acquired by a resident or HUF before July 23, 2024.