Tax Planning


Tax on Inheritance

27 Sep, 2014

An inheritance may seem like a windfall gain. There is usually a temptation to blow it away on a luxurious holiday or buying a luxurious asset. Some bit of planning the inheritance will go a long way in securing one’s future.

Tax  on  Inheritance.

Currently there is no tax on inheritance in India.  The tax becomes applicable when there is sale of an asset received from inheritance.

The cost of the previous owner is considered as the cost and indexed upto the date of sale to arrive at the indexed cost of purchase. Initially the year of purchase of the previous owner  was considered to ascertain whether the asset was long term or short term. The cost of indexation was allowed only from the date the gift was made. However verdicts on many cases have now revealed that the indexation benefit too can be given base on the date of purchase  by the previous owner .

If however the property is purchased prior to 1st April 1981 , the cost  or the market value as on 1st April 1981 whichever is beneficial to the  assessee  can be considered.

Some of these cases are as below

Deputy CIT v. Kishore Kanungo, 102 ITD 437 (Mum.).

Smt. Mina Deogun v. ITO, 19 SOT 183 (Kol.).

If however the property is purchased prior to 1st April 1981 , the cost  or the market value as on 1st April 1981 shall be.

If there are any intermediate transfers they should be ignored, since these are transfers without any consideration. For all practical purposes, the ultimate owner is regarded as having held the asset from the date of its first acquisition for a consideration by an earlier owner, and his cost is also taken on the same basis.

As mentioned earlier there is no tax when inheritance is effected. However one should not ignore the implication of wealth tax provisions once the assets are acquired.

It is also very important to keep all the documentation with respect to the inheritance safely for queries could arise at a much later date and substantiating that you have received it through a succession would  be crucial.

Shantala Kumble, CFPCM, IRDA-Certified Life Insurance Consultant and a certified Cost Accountant, with 14 years of work experience in the financial services industry, has her fingers in many pies. She currently is the Head for Compliance, and is our resident Tax-expert.

If you are also interested in getting your articles published here, please mail them to This email address is being protected from spambots. You need JavaScript enabled to view it.

See here

Kotak moneywatch newsletter