Inheritance planning: tax implications of assets received

Inheriting property and assets can be a watershed moment in a person's financial journey. Whether it's the family home, real estate, or any other valuable property, it's a warm reminder that you are a loved and important person for someone to leave something behind. However, this feeling can be hindered by the tax liability that comes after receiving it. Therefore, it has become important to understand the tax liability on inherited assets in order to conduct inheritance planning effectively.

Also, many of us mistakenly believe that inheritance planning is something to think about after retirement. However, it's worth knowing that the right time for inheritance planning is now.''As far as India is concerned, let us dispel one common misconception. In our country, we don't have to pay inheritance taxes and in fact, this law was repealed in 1985. Therefore, you don't have to worry about inheritance tax while planning your inheritance.

Tax implications on inherited assets

When a situation of inheriting an asset arises, under the Indian Income Tax Act, 1961, the relevant taxes come into play. For example, if a person dies, his property passes to his heirs by law. Now, there may be situations where inherited assets open up revenue streams for new owners in''in the form of interest or rent. In such cases, this income may be added to your other sources of income and is subject to income tax. The owner of the inherited property is liable for tax at the appropriate rate on the total capital gains realized from the sale of the property. However, Section 54 of the Income Tax Act provides for a potential exemption if the proceeds of the sale are used to purchase a new home or other property of equal or greater value.

A misconception about inheritance planning is that only high net worth individuals should plan for it. However, this is not the case and it is essential that everyone, regardless of wealth or age,