Taxes On Property: It is common to get property in inheritance or will. People get property in inheritance or will from grandparents, parents i.e. older generation. In such a situation, a question often arises in the mind of the people whether such transfers also attract tax? Let us know when is the tax payable on inherited property?
What does the law of India say?
Normally, after the death of a person, his heir i.e. the successor gets the property. The heir gets this property through a will or according to personal law. Personal law is used when a person dies without making a will. First of all, let us tell you that Inheritance Tax / Estate Tax has been abolished in India. In such a situation, the property inherited from parents or family does not come under the purview of income tax. Then whether it was received as an ancestral property or in a will. However, in certain circumstances, the tax becomes a liability.
get the benefit of indexation
When you receive a property through will or succession, it is not taxed, but when you sell that property, it is taxed as per the normal capital gain law. The advantage is that the cost of the property from whom it is acquired is treated as the cost of the house and you get the benefit of indexation from the time it was purchased. If the property is before the year 2001, then what was the value of the property in 2001, it will be considered as the cost of the property after getting its valuation done.
When will tax be levied on such property?
If the property is sold, then the income from it is kept under the ambit of capital gain, whether you have inherited the property or you have bought it yourself. The liability of capital gains tax on the sale of immovable property depends on the person from whom you have got the property, when he bought the property and for how much. The same will be considered as the cost of the house and the holding period will also be counted from then onwards. Long term capital gains tax will be applicable on holding period of more than 2 years. Whereas, if the holding period is less than 2 years, short term capital gain tax is applicable.
How much will be the tax on the sale of property?
If a person dies within 2 years of purchasing the property and the property is transferred to his heir, the sale of the property will be subject to short term capital gain tax. The amount of sale will be added to the income of his heir and will be taxed according to the slab. If the holding period is more than two years, long term capital gains tax will be levied at the rate of 20 per cent after getting the benefit of indexation.
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