Tax on inherited property - Fusion - WeRIndia

Is it necessary to pay tax on inherited property?

Is it necessary to pay tax on inherited property?

Many people assume that they do not have to pay tax on the property they inherit on death of a family member as gift tax is not applicable. However, individuals are liable to pay tax on inherited property even though gift tax is not applicable.

When you have two properties, one of them would be deemed to be rented out and income from house property will be applied. If you have only one house, then no income applies on it. However, if you inherited a second property, it doesn’t matter if you rent it out or not, you would have to take into account the rental income.

If you haven’t rented it then you have to assume the fair rentals that would apply if the property were let out and show that in your income tax returns. If you have two houses and one of them is inherited you still have to follow this rule. However, you can deduct for repairs and interest paid in case of a loan.

If you sold an inherited property, it will attract a capital gains tax and you should check if it is a long term or short term capital gains tax. Long term capital gains are applied if you have held the inherited property for more than 3 years. You can also add number of years for which previous owner held the property.


If your parents have bought an apartment for Rs 5 lakh and you inherited it with the decision of selling it, you would have to pay tax on the extra amount for which you sold the apartment. You will have to take into consideration indexation benefits that may arise.

There are ways to avoid capital gains tax. If you purchase another property of invest your money in capital gains bond, you can avoid capital gains tax.

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