Inheritance Tax in India: Know What Comes with Inherited Assets?
Inheritance tax has a long history in India, and those who have received inherited assets like property, real estate, precious metals and other valuables must know it in detail. The Inheritance Tax is a tax imposed on the estate of a deceased person and the beneficiaries named in the will or to those determined by intestate succession laws pay it out. Though currently, there is no inheritance tax in India, yet this article covers up the history of inheritance tax, its implications, challenges, and current updates.
Inheritance Tax in India History
The inheritance tax is also known as estate duty or death tax in India. It was applicable till 1984 and in the year 1985, it was abolished and currently there is no inheritance tax. Though no direct inheritance tax is applicable, the income tax is payable on the income generated from the inherited sources. For example
- If the heir sells the inherited assets for holding them for a particular time, capital gains tax is applicable in such a case. Like if it is held for more than 24 months (unlisted assets), then the Long Term Capital Gains tax (LTCG) is applicable. The LTCG rate is 12.5% now while it is held for less than 24 months (unlisted assets), it is taxed at the rate of 20% u/s 111A
- In case the inherited assets generate income from renting or interest, then this income is taxable as per the applicable slab and it must be declared while filing the returns
Income Tax Implications for Inheritance in India
The assets received from inheritance do not come under the purview of income tax in India directly. However if these assets generate income from renting or interest, then the taxes are levied as per the existing slab rates. When the heir sells the property or assets and makes long term or short term capital gains, then also the taxes are applied accordingly. Therefore, you must know how you can handle the taxes if you recently received lots of sum in inheritance.
How to Calculate Tax on Income from Inheritance
The calculation of tax on income from inheritance is the same as it is for the normal income from different sources. For example, a taxpayer holds assets for long term or short term, the capital gains taxes apply as per the case.
In most cases, the heirs receive income from renting or interest, then in such cases also, the income is taxed as per the applicable slab rate and the taxpayer must show this income into the records to the Income Tax Department.
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