Is There Inheritance Tax on a Flat You Inherit in India? What You Pay, and When

India has no inheritance tax. Estate duty was abolished in 1985. But rent from an inherited flat is taxed, and so is the gain when you sell it, based on the original owner's cost.

NRIs who inherit a parent's flat in Mumbai often expect a large tax bill, partly because the countries they live in have inheritance or estate taxes. India does not.

No tax on receiving it

India abolished estate duty in 1985, and there is no inheritance tax today. Receiving a flat through a will or by succession is not taxed.

Inheriting a flat is tax-free. Renting it out or selling it is not.

What is taxed

Rent: if you let the inherited flat, the rent is taxable as income from house property. If you are an NRI, your tenant must deduct TDS. See TDS on rent to an NRI landlord.
Sale: capital gains apply when you sell. Your cost is what the original owner paid, and your holding period includes the original owner's holding period.

Practical points

Find the original purchase papers. Without the original cost, working out the gain is harder.
Get the flat transferred to your name in the society records first. See transferring a flat after death.
Your country of residence may tax the inheritance or the sale. Check there too.

Related: selling an inherited flat.

Frequently asked questions

Does India have inheritance tax?

No. Estate duty was abolished in 1985, and receiving property by inheritance is not taxed in India.

How is capital gain calculated on an inherited flat?

The cost is what the previous owner paid, and the holding period includes the previous owner's holding.

Sources

This is general information, not legal or tax advice. Rules change, so check your own case with a lawyer or CA.

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Yanik

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