Income Tax Act We all should pay tax on time. In such a situation, many people remain very confused about the tax levied on inherited property. So do you know when inheritance tax is applicable? Apart from this, what property is included in the property of inheritance? Know about it in detail.
Tax On Inherited Property: The property of our ancestors is very important for us. Selling this property is very difficult. If we look at the tax, we will find that it is a very difficult task. Many people get confused about whether inherited property will be taxed or not. Come, let us help you clear your confusion today. Actually, we have to pay tax on inherited property when we sell it.
Think of it as if I have inherited property, I will not pay any tax on it. I will have to inform the Income Tax Department about that asset, but I will not pay any tax on it. If I sell my inherited property, then I will have to pay tax on that property.
Who is included in the inherited property?
There is also a confusion regarding inherited property as to which property is ultimately called inherited property. Inherited property includes land or property that we inherit from our father, grandfather or great-grandfather. If we get any property from our mother’s family i.e. maternal grandfather, maternal uncle or other relatives, then it is not called inherited property. We are required to report such assets under the Income Tax Act, 1961 .
Who will pay tax on inherited property?
We have to pay tax on the sale of inherited property. It is the responsibility of the owner of the property to pay the tax levied on the property. By the way, any inherited property is considered as a gift and is tax free. But if this asset is sold then it is taxed. This tax comes under the category of capital gains. You also have to classify the capital gain as long-term or short-term. It depends on how long you have held any asset.
Suppose you own an ancestral property for two years, after that you sell it. When you sell the asset, whatever revenue comes to you i.e. the sale amount is considered as long-term capital gain.
Income tax act on inherited property
The Income Tax Act also has certain rules regarding inherited property. As per the Income Tax Act, if a property was inherited before April 1, 1981, then the owner of the property has an option to convert the fair market value of the property. And if the property is inherited after April 1, 2001, then the cost of acquisition is considered to be Rs 50,000.
In case of property inherited after April 1, 1981, you will not be able to set off the amount paid by the owners for tax purposes. Also, in many cases, you become entitled to the benefit of indexation from the year you receive the inherited property.
