First of all, let’s talk about inherited property. When you inherit property, there is no tax on it at the time of acquisition and no income tax rules apply to it. However, some state governments charge a fee for the documentation of such properties. But it has nothing to do with taxes. Such assets are completely beyond taxation.
What taxes on sale of property
There are several types of taxes to be paid on the sale of property. Various types of taxes are levied on the sale of property by both the Central Government and the State Government. Some of these taxes have to be paid by the buyer, while some taxes have to be paid by the seller.
Tax on Inherited Property
An important question is, if there is income from inherited property, such as rental income, will that income be taxed? The answer is that if you own a property that generates income, that income will be treated as yours. You will then have to pay tax on that income. Similarly, if you have received shares or fixed deposits as gifts, you will have to pay income tax on the same.
Calculation of tax on capital gains
Meanwhile, if you are selling an inherited property, there is a provision for taxing it on a long-term or short-term basis. This is called capital gains tax. Tax is calculated on capital gains basis on sale of property and tax is added on that basis. But there is also a provision of tax saving on this, wherein tax can be saved on capital gains subject to certain conditions. Suppose you have sold an inherited house and made a capital gain on it, the only way to save tax on it is to buy a new house with the sale proceeds.
Income must be shown in ITR
On the other hand, another question is what happens if the income from sale of inherited property is not shown in the income tax return. Can the department take any action if the tax is not shown in the income tax return form? Capital gains on sale of any property must be shown in the income tax return. If not, tax department can take action against you.
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