People often have a question in their mind that if they inherit jewellery, land, shares, artwork or cryptocurrency from their family, do they have to pay tax immediately? The rule in India is clear that income tax is not levied at the time of inheriting property. But the story does not end here. Later, when you sell that property or have to show its information in the return, then tax rules apply. Many families do not pay attention to these important things.
When does tax have to be paid?
Tax experts say that there is no tax on acquiring property, but capital gains tax has to be paid on selling it. An important point here is that for the person who gets the property, the purchase price and holding period (for how long it was held) are calculated on the basis of the previous owner. This determines whether the profit is long term or short term.
How much is the tax?
Long term gains are generally taxed at 12.5%. Tax has to be paid on short term gains as per your income tax slab. If the amount received from long term gain is invested in buying a house up to Rs 10 crore or in government bonds up to Rs 50 lakh, then exemption can be availed. But Virtual Digital Asset (VDA) like crypto is directly taxed at 30% and there is no exemption of any kind in it.
Disclosure required in income tax return
If your total wealth is more than Rs 50 lakh, then it is necessary to declare it in the income tax return. If the property is abroad, then separate information has to be given. Failure to provide information may result in a fine. The rules for every property are different. Correct valuation and documentation is essential for gold, jewelery and artwork. Taking some artwork out of the country may be against the rules. If the nominee is registered in shares and mutual funds, then transfer is easy. If there is no nominee, the legal process may be lengthy. Cryptocurrency can be inherited, but if there is no private key or password, the money can be stuck forever.
What to do if you have property abroad?
If the property is held abroad, the tax rules of that country may also apply. Inheritance tax is levied in countries like America or Britain. There is an annual limit of $10 lakh under FEMA rules for sending property abroad from India. Experts recommend making a complete list of all assets. Prepare separate wills for different countries. Keep information about digital assets in a safe place. In simple words, there is no immediate tax on inheriting property, but further planning and knowledge of the rules is very important.