Inheriting property is a happy thing for almost every person. But, people often forget about the tax implications they are required to deal with after inheriting a property. So, here we have explained the important things about taxation on the property you inherit via registered will and intestate of property. Scroll down the blog and understand these cases in details:
1. Ways to Inherit Property in India
There are two ways to inherit property as per the laws in India. Firstly, a person can inherit a property under a valid will in which the property owners declare you as the owner of his/her property as soon as he/she leaves for the heavenly journey.
Secondly, a person can inherit the property in case the property owner dies intestate that is in case of property owner’s sudden death.
2. Property Tax in India
Estate Duty is the term used for the tax levied on the inherited property. Although this tax was abolished in the year 1985 and there is no tax a person is required to pay for inheriting property. But, the key thing to consider is that a person is eligible to pay tax on the income which is earned by the property inheritor.
3. Tax implication While Inheriting Property via a Registered Will
The property owner makes the other person his/her successor while having a stable mental health. Once all the immovable assets are named onto the name of another person then the property owner has to get the will registered as per the law. This makes the will a registered document for transferring assets to someone.
Remember that a successor becomes the property owner only after the actual owner’s death. You must also know that the person inheriting the property becomes liable to pay the tax for that particular property from the year in which the actual property owner dies.
People from the Muslim community can transfer only one-third of their immovable property to any person under the will. A person has to take consent of the entire family if he/she wishes to make any particular person inheritor for more than this ratio of his/her property.
4. Showcase of Tax on Inherited Property in ITR Filling
Apart from depositing tax on the income earned from the inherited property, the inheritor is also required to mention the same along with receipts in the Income Tax filling every year. The income earned by the inheritor from the inherited property has to be lodged as ‘Estate of the late_Name.
5. In Case of Sudden Death
The inheritor has to bear the filling of income tax on the property which he/she acquired even for a single day. This means if the actual property owner dies even one day before the completion of financial year then the inheritor has to file the income tax in the place of dead.
6. In Case of Intestate Inheritance
The legal heirs automatically become an inheritor of the property in case of actual owner’s sudden death. The inheritor is also liable to pay the tax on the income earned from this property right from the day of the financial year. In case there is more than one inheritor then all of them have to pay individual tax for having a share in the property despite being the Association of Persons.