25 July 2024
In India, the Income Tax Act, 1961 provides specific provisions regarding the tax treatment of immovable property received through inheritance or will. Here’s how such property is treated for income tax purposes:
1. **Nature of Receipt**: Immovable property received through inheritance or will is considered a capital asset under the Income Tax Act.
2. **Exempted Income**: As per Section 56(2)(x) of the Income Tax Act, any immovable property received by an individual or Hindu Undivided Family (HUF) through inheritance or will is exempt from income tax. This exemption applies whether the property is received from a relative or a non-relative.
3. **Stamp Duty Value**: However, if the stamp duty value of the immovable property exceeds INR 50,000 more than the consideration received (if any), the difference is taxable as "income from other sources" under Section 56(2)(x) of the Income Tax Act. The stamp duty value is the value adopted by the state government for the purpose of payment of stamp duty.
4. **Reporting in Income Tax Return**: - You need to disclose the details of the immovable property received under the head "Income from Other Sources" in your income tax return. - If the property qualifies for exemption under Section 56(2)(x), you should mention it as exempt income in the income tax return.
5. **Capital Gains**: When you eventually sell or transfer the inherited or bequeathed property, the capital gains tax will apply. The cost of acquisition for the purpose of calculating capital gains will be the cost to the previous owner or the fair market value of the property as on April 1, 2001, whichever is higher (in case of inherited property).
6. **Legal Documentation**: It’s important to retain legal documents such as the will, inheritance certificate, and other related documents as they may be required as proof during income tax assessments.
In summary, immovable property received from inheritance or will is generally exempt from income tax under Section 56(2)(x) of the Income Tax Act, unless the stamp duty value exceeds the specified limit. It's advisable to consult with a tax advisor or chartered accountant to ensure compliance with all applicable tax laws and to correctly report such transactions in your income tax return.
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