Should the property you inherit from your grandfather, great-grandfather or father be taxed? Of course you will answer this in the negative. But do you know what is this Inheritance Tax? After all, why has there been increased excitement in political circles regarding this tax? But before that, know what this inheritance tax is.

What is Inheritance Tax?

Inheritance Tax, as the name suggests, is a tax levied on inherited property. If you have inherited any property from your grandparents or father, then this tax is applicable on it. Don’t worry, tax is not levied in India yet. But the whole matter started when Sam Pietrada said that in America, when a father gives property to his son, the government takes 55 percent of it.

Talking about America, there is no federal law on inheritance tax. However, many states impose two types of taxes: inheritance tax and estate tax. Estate tax is levied on the total value of the deceased person’s estate. Inheritance tax is levied on people who inherit assets or property from their ancestors.

Inheritance Tax: How is it calculated?

Inheritance tax applies only to a portion of the property inherited. That too when the value of this property exceeds a limit. Property up to the value of 10 lakh dollars is exempted from this tax. Tax rates on property above this range from 1 percent to 18 percent. According to an article in Investopedia, in six states of America, if the wife of a deceased person is alive, he is exempted from inheritance tax.

Inheritance Tax: Was this tax ever levied in India?

Inheritance tax in India was abolished in 1985. It was abolished by the government of former Prime Minister Rajiv Gandhi. When this law was in force, this tax was levied on the property transferred to a person’s children or grandchildren upon his death. Under the Estate Duty Act, 1953, estate duty was levied up to 85 percent of the value of inherited property.

Also Read-

• Modi government transferred money to the accounts of 28 crore people, did you get it? check balance
• BSF Recruitment 2024: Golden opportunity to become an officer in BSF, apply immediately in UPSC
• Bank Holiday Alert: Big news for bank customers! Bank Holiday for three days from today in these cities, know here

The post What is Inheritance tax: What is the inheritance tax that is levied on ancestral property? When was this tax imposed in India first appeared on Rightsofemployees.com.

It is a pleasure for all to receive an inheritance, unexpected or expected, from their relatives. Which makes you feel that you were so important that someone could leave something for you. But what about when you come to know that you may have tax liability on the inheritance received? Does one have to pay inheritance tax in India? What if you decide to sell the movable or immovable property acquired? Is there any short term or long term capital gains tax involved?

Inheritance tax is levied on any property or assets that are bequeathed by the deceased to his legal heirs. Be it children or grandchildren. The good news is that there is no inheritance tax in India. Although many developed countries still use it. This tax was abolished in 1985, prior to which the Executors of the estate of the deceased had to pay a high ‘Estate Duty’ of up to 85% of the value of the inherited property under the Estate Duty Act, 1953.

Even though properties given to legal heirs may be treated as gifts, since they are received without consideration, no gift tax is levied because the Income Tax Act, 1961, provides for property received by way of inheritance or will. excludes from inheritance. Hence, these are not treated as income and no tax liability will arise on the property received by you as inheritance. It is possible that the asset or property that you get may be capable of generating income. For example, you may inherit a rented house and, as the legal heir, you become the owner of this property. In such a case, the rent will be added to your income and taxed at the applicable rate.

If you receive any bank deposit or property that earns interest, it will be added to your income and taxed. So the income from inherited property or assets will be taxable in your hands. Once you become the owner of the inherited property or asset, you can choose to sell it at a later date. If you do so, any gain or loss from the sale of this asset will go to you. In case of profit, you will have to pay capital gains tax. Whether it is short term or long term capital gain will be determined by the holding period of the asset. For computing the holding period, your cost of acquisition will be considered as on the original date of purchase by the deceased.

For example, if you have inherited a house in 2020 after your father’s demise and you decide to sell it in February 2022, the profit earned by you will be considered as capital gain. If your father bought a house in January 2007 for, say, 50 lakhs, then this purchase price would be treated as cost of acquisition. The holding period will be considered as 15 years as it will include the period for which both you and your father held the property. Since this period is more than 24 months, it will be treated as long term capital gain and you will have to pay tax accordingly. You can take into account inflation to reduce your tax liability while computing capital gains.

The post Tax on Property: Do I have to pay tax on my inheritance? first appeared on Rightsofemployees.com.