Income Tax Rules for Ancestral Property and Inheritance: It is common for a person to inherit some movable or immovable property through inheritance or will. This is what is called ancestral or family property. Inheritance tax is not applicable in India. Therefore, if the taxpayer has received property, jewelery, or cash from his parents or as a family inheritance, then it does not come under the purview of income tax. Whether it was received as ancestral property or in a will from someone else.
What are the rules on sales?
If the taxpayer earns money by investing the amount received in inheritance/will, then he will have to pay income tax on this earning. Similarly, if he sells the house/property received through inheritance/will or later uses it as a means of earning or earning interest, then he will have to pay tax on the income from this. The income earned from the sale of a house/property is kept in the category of capital gains.
How will capital gains tax liability be determined?
Capital gains tax liability on the sale of immovable property depends on how long it remains with the taxpayer. In the case of inherited property, its holding period is counted from the date the property was purchased by the original owner and not from the date it was inherited.
If the immovable property is being sold after a holding period of more than two years, then the sale proceeds will be considered as long-term capital gains. If the holding period of the property is less than 2 years, then the sale proceeds will be treated as short-term capital gains. Income tax will be payable accordingly.
How can you take a tax deduction on capital gains?
Before the presentation of the Interim Budget 2019, tax deduction on capital gains on the sale of a residential house and purchase of another house was available only if only one residential house was purchased with that money. But the provision was changed in the interim budget 2019 and the change was that if the taxpayer buys or builds two residential houses from the amount received from the sale of the house, then he can avail the benefit of tax deduction on capital gains on both the houses. Is.
But there are these conditions along with it
Some conditions are applicable with this new provision, which are as follows-
1. This benefit can be availed only once in a lifetime.
2. The amount of long-term capital gains made by selling property should not exceed Rs 2 crore. If the amount exceeds Rs 2 crore, the taxpayer will be able to avail the benefit of tax deduction only on the purchase of a residential house.
3. To avail of tax deduction on the money received from the sale of property, it is necessary to buy another house from it within a certain period. For example, in the case of a new ready-to-move house, within two years from the date of sale of the property, within three years from the date of sale of the property in case of a new construction house.
You can also save tax like this
There is another way to claim tax deductions on capital gains from the sale of property. That is, if the taxpayer wishes, he can invest the capital gains in a Capital Gains Bond under Section 54EC of the Income Tax Act and can claim a tax deduction on it. But remember that the limit for investment in Capital Gains Bonds is up to Rs 50 lakh per financial year.
What is considered ancestral property?
Under ancestral property, the income tax law covers only money, jewelery, and immovable property inherited from father, grandfather, and great-grandfather. Property inherited from the mother's ancestors is not included in ancestral property, however, property inherited from the mother or her ancestors is also exempt from tax. If ever the Income Tax Department questions the taxpayer about movable or immovable property received through inheritance or will, then the taxpayer will have to prove that the amount or property, etc. has been received from parents or by will or as family inheritance.
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