My cousin lives in the UK with his family, and once he was speaking about how annoyed he was to pay the inheritance tax there. I have never quite heard of it, so I had to know what it is and how to avoid inheritance tax on parents house. I learned several aspects about it, so let me give you a brief synopsis on this topic here.
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Is inheritance tax levied in India?
In many countries, there is an inheritance tax levied, but you should know that in India there is no such tax. It was in place previously, but since 1985, the Inheritance or Estate Tax has been abolished. After the death of a person, the properties belonging to the deceased shall pass to his/her legal heirs. There is a transfer of property happening, but in such cases, the properties qualify as a gift for income tax purposes.
The same rule is applicable to an NRI as well. He or she can inherit the property as per the Foreign Exchange Management Act (FEMA), and no tax will be levied on that property.
When is an inherited property taxed?Taxes will only be levied on an inherited property when the property is used as a source of income, like for rental purposes. When the heir becomes the owner of a rented property, the income goes to him, so he/she then must declare this income and pay taxes accordingly.
I have seen many people with the query of how do you avoid inheritance tax. Do note that taxes on the inheritance of property get levied when it is sold. The new owner needs to pay taxes on the long-term capital gains from the sale of the property. If the property is held for more than three years from the date of acquisition, the new owner must pay tax after selling the asset.
How to save tax on inherited properties?You can save capital gains tax in that case. Section 52 of the Income Tax Act of 1961 states that the
New owner will be exempt from this tax if he/she invests the proceeds of the sale in another property having the same or more value than the inherited one.
One can also claim tax benefit if the amount of gain is used to construct a house within three years from the sale of the ancestral property
The third option is to invest the gained amount in a capital gains bond under Section 54EC of the Income Tax Act 1961. The amount mentioned in this bond is restricted to Rs 50 lakh per financial year.
I hope this now clearly answers how can I avoid inheritance tax.
You can consult with a legal expert in you are still in doubt. This is what I know about
how to avoid inheritance tax on parents house.
Read More: How to calculate long term capital gains on sale of property?How to avoid capital gains tax in India?
How can I Avoid Inheritance Tax?
Arun
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2023-04-19T10:20:09+00:00 2023-04-20T08:16:13+00:00Comment
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