Income Tax Act : We all should pay tax on time. In such a situation, many people remain confused about the tax levied on inherited property. In such a situation, do you know when inheritance property is taxed? Apart from this, which property is included in inheritance property? Let us know about it in detail.
The property of our ancestors is very important for us. It is very difficult to sell this property. If we look at tax, we will find that it is a very difficult task. Many people are 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.
Understand it this way, if I have any inherited property, I will not pay any tax on it. Even though I will have to inform the Income Tax Department about that property, 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 confusion regarding inheritance property as to which property is ultimately called inheritance property. Inherited property includes the 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 have to give information about such property 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 property owner to pay property taxes. However, any inherited property is considered a gift and is tax free. But if this property is sold then it is taxed. This tax falls in the category of capital gains. You also have to classify the capital gains as long-term or short-term. It depends on how long you have held any asset.
Suppose you hold an ancestral property for two years, after which you sell it. When you sell the property, whatever revenue comes to you i.e. the sale amount is considered as long-term capital gain.
Income Tax Act regarding inherited property
There are some rules in the Income Tax Act also regarding inherited property. According to the Income Tax Act, if a property was inherited before April 1, 1981, then the owner of the property has the option to change the fair market value of the property. Whereas 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 replace the amount paid by the owners for tax purposes. Additionally, in many cases, you become entitled to benefit from indexation from the year you receive the inherited property.
