Capital Gains Tax On Inherited Properties

At present, there is no tax on inheritance in India. However,when you sell these inherited properties, you would be liable to pay income-tax in India on the gains earned by you on the sale.

For determining capital gains, you will get a deduction of the cost incurred by the previous owner to acquire the property as well as any expenditure that you directly incur to sell the property. If the date of acquisition of the property is more than three years back, you will get a deduction of the indexed cost of acquisition which is the original cost as adjusted by the cost inflation index from the year of purchase to the year of sale. If the property has been acquired before 1 April 1981, you have the option of substituting the fair market value as on 1 April 1981 in place of the original cost. Thereafter, you can claim indexation benefit on the substituted cost.

The rate of tax, including cess on long-term capital gains, is 20.6% and on short-term capital gains, it is 30.9%. If your income exceeds Rs.1 crore, the rate of tax would be 20.66% and 33.99%, respectively. Read more of this post