Inheritance Tax in India & different Taxes on Ancestral Property

Inheritance Tax (additionally known as Property Tax) is a tax which is levied on the time of inheriting any asset. Inheritance Tax just isn’t levied in India as any quantity acquired below a Will or by means of inheritance or in contemplation of loss of life of the payer is exempted below Part 56(ii) from the levy of any Revenue Tax.

  • Beneficial Learn: Tax Exemptions on receipt of Items

Tax on Revenue arising out of Inherited Property

Though no tax is levied on receiving the inherited belongings in India, however revenue tax could be levied on the receipt of any revenue arising from such inherited belongings. This may be defined with the assistance of the next instance.

For eg: Mr. A purchased a property for Rs. 1 Crore in 2003. He died in 2015 and the property was gifted to his son Mr B. The Market Worth of this property in 2015 on the time of loss of life of Mr A was Rs. 2 Crores. This property was on Lease and the month-to-month hire acquired was Rs. 1 Lakhs per 30 days.

No Revenue Tax could be levied on the receipt of property as Inheritance Tax just isn’t relevant in India. On switch of this property from father to son, the son will begin receiving the hire. This hire acquired by the son could be added to the revenue of the son and taxed as per the revenue tax slab charges of the son.

The particular person receiving the revenue arising out of such inherited property would even be required to file Revenue Tax Return on the finish of the yr and disclose the incomes earned through the yr within the Revenue Tax Return.

  • Beneficial Learn: Revenue Tax efiling On-line in 6 Easy Steps

Capital Positive factors on Sale of Inherited Property

When the son sells this property, he could be liable to pay Capital Positive factors on the sale of this property. The associated fee for which the daddy had bought the property could be handled as the price of acquisition. This value would even be allowed to be listed to compute the capital good points.

The Capital Positive factors on this case could be computed as follows

Full Worth of Consideration xxx
(Much less) Expenditure wholly and completely incurred in reference to such Sale (xxx)
(Much less) Listed Price of Acquisition (xxx)
(Much less) Listed Price of Enchancment (xxx)
Gross Quick Time period Capital Positive factors xxx
(Much less) Exemption (if any) accessible below Part 54, 54EC, 54F (xxx)
Web Quick Time period Capital Positive factors xxx

For an in depth learn on computation of Capital Positive factors, kindly refer this text – Computation of Capital Positive factors Tax in India.

Different Related Factors

  1. In case the asset is acquired by greater than 1 particular person, the tax could be levied within the fingers of every particular person in equal proportions. For eg: If within the above talked about instance, there have been 3 sons, the hire and capital good points will get divided into 3 components and the tax on rental income and capital good points tax can even get divided into 3 components.
  2. If the son Mr. B doesn’t promote the property however moderately presents the identical to his son Mr. C, tax in such a case wouldn’t be levied. In different phrases, the property bought by Mr. A is now being owned by Mr. C. In such a case as nicely, the identical above talked about provisions will apply i.e. the rental revenue could be taxed within the fingers of Mr. C and no tax would come up on switch from Mr. B to Mr. C. Capital Positive factors Tax would solely be levied on the sale of property from Mr. C to some outsider.
  3. Inheritance Tax was earlier relevant in India from 1953 to 1985. There have been rumours that the Govt intends to reintroduce Inheritance Tax in India however the identical have been dismissed by all Govt sources. It’s extremely unlikely that Inheritance Tax could be reintroduced in India.

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