Income Tax on Inherited Property


#1

I am the beneficiary of an inherited property I received from my uncle last year. Now I want to sell the property. What is my tax obligation if I sell the property? Also is there any tax on inheritance in India?


#2

Firstly the income tax act of 1961 does not seek any tax obligations for inheriting any property or any financial instrument for that matter. So there is no inheritance tax in India but tax liability gets applicable in case one sells the inherited property.

If the successor holds the property for less than three years before selling it off, the successor would be liable for short term capital gains tax. So in your case considering you inherited the property last year, the sale proceeds would attract a short term capital gains tax which is taxed at 30.9%. Taxation is applicable on gains made from sale of all such inherited property.

In case you wait for three years and hold the property for more than three years from the time of inheritance short term capital gains would not be applicable. You would then need to pay a long term capital gains tax at 20.6%. Of course the exact tax obligation is calculated by determining the actual cost of the property and its selling price in order to determine the gains made.


#3

Hi,

If the property you inherited is held for over 36 months then it will be treated as a long-term asset. This includes both the time period for which you held the house as well as the time period for which the previous owned held it.

If the property was held for a period less than 36 months, then the actual acquisition cost as well as any improvement costs are deducted. The remaining amount will be treated as short-term capital gains and taxed according to the tax slab rate that applies to you.

If the total holding period of the property is more than 36 months, then you can deduct the acquisition cots as well as the improvement cost as enhanced by the cost inflation index multiplier. This multiplier is calculated based on the cost inflation index of the purchase year and the sale year.

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