Inheriting property refers to the process by which ownership of property is transferred from a deceased person to their legal heirs. This can include real estate, money, investments, and other valuable assets. The inheritance process is typically governed by the deceased’s will or, in the absence of a will, by the laws of intestate succession. Inheriting property can involve various legal and financial considerations, including probate, taxes, and the management of the inherited assets.
Understanding property inheritance
Inheritance involves receiving assets from someone who has passed away, typically through a will or as per statutory laws if there is no will. Inheriting property means you will be legally recognised as the new owner of the asset, which can have significant financial and legal implications.
What is an example of inherited property?
To understand the concept better, let’s study an example.
- Say a man owns a house.
- He bought the house himself using his own money.
- This house is called a self-acquired property.
- Later, the man gives this house to his son.
- This can happen in one of the following ways:
- By will (after the father's death, as mentioned in his will)
- By gift (while the father is alive, through a registered gift deed)
- By sale (the father sells the house to his son, even for a token amount)
Once the house is transferred, it becomes the son’s inherited property because he got it from his father (even though the father originally bought it). The son holds ownership rights and is free to sell or mortgage it.
Key Aspects of Inherited Property
Inherited property refers to any asset or property received by a person posthumously (usually after the death of a family member). The person who receives the property is called a legal heir.
For more clarity, let’s study some key aspects of inherited property:
1. Transfer of ownership
When a person is deceased, their assets, such as land, house, money, or jewellery, are passed on to the legal heirs. This transfer of ownership is what we call inheritance.
2. Legal framework in India
In India, the rules for inheritance are defined under specific laws. The most common ones are:
Hindu Succession Act, 1956 |
Indian Succession Act, 1925 |
Applies to Hindus, Sikhs, Jains, and Buddhists. |
Applies to Christians, Parsis, and others. |
These laws define who can inherit and how the assets will be divided.
3. Will vs. No Will (Intestate succession)
When it comes to inheritance, a valid will plays a big role. Let’s see how:
Presence of a legal will |
Absence of a legal will |
|
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4. Who are the legal heirs
Legal heirs are the close relatives who have a right to inherit. These usually include:
Spouse
Children
Grandchildren
Siblings (if there are no immediate heirs)
5. Capital gains tax
When a person receives inherited property, they do not pay any tax at the time of receiving it. But if they decide to sell the inherited property later, they may have to pay capital gains tax on the profit made from the sale.
6. Inherited vs. Ancestral property
Inherited property is received from a deceased person.
On the other hand, ancestral property is a special kind of inherited property. It has been passed down through several generations without being divided.
7. NRIs and inheritance
Non-Resident Indians (NRIs) can also inherit property in India. The current Indian laws allow NRIs to inherit property, but there are some rules they must follow.
Additionally, they must report the inheritance to tax and legal authorities in both India and their country of residence.
Difference between inherited and ancestral property
Inherited property is any property received from a deceased person through a will or by the laws of succession. It can be from any relative and is not restricted to paternal lineage. Ancestral property, on the other hand, is a specific type of inherited property that has been passed down through generations.This type of property is governed by specific laws and cannot be sold or transferred without the consent of all heirs.
Documents required for property inheritance in India
To inherit property in India, you will typically need the following documents:
- Death certificate: Proof of the deceased’s death.
- Will: If available, the will of the deceased.
- Succession certificate: Issued by a court if there is no will.
- Legal heir certificate: Identifies the legal heirs of the deceased.
- Property documents: Title deeds, sale deeds, or any other documents proving ownership.
- Identity proofs: IDs of the legal heirs.
- Encumbrance certificate: Shows any legal liabilities on the property.
Legal requirements and formalities for property inheritance
The legal requirements for property inheritance include the probate of the will, if one exists, which is a court-supervised process to validate the will. If there is no will, the legal heirs must obtain a succession certificate from the court. This certificate authorizes the heirs to inherit the property.Additionally, all property documents must be updated to reflect the new ownership, and any outstanding debts or taxes on the property must be settled.
Tax implications of inheriting property
Inheriting property can have several tax implications. While there is no inheritance tax in India, the heirs may be liable for capital gains tax if they sell the inherited property. The capital gains are calculated based on the property’s fair market value at the time of inheritance.Additionally, property taxes and other local taxes may apply depending on the property’s location.
Navigating through property inheritance requires careful planning and professional advice. By staying informed and seeking the right financial support, you can make the most of your inherited asset and ensure its successful management.
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