Inheritance Tax, also known as Estate Duty, was a form of tax that the Government of India used to levy on the total market value of the assets inherited by legal heirs after the death of an individual. It was intended to ensure that large transfers of wealth were taxed at the point of inheritance. However, India abolished Inheritance Tax in 1985, meaning there is currently no estate duty or inheritance tax applicable under Indian tax laws.
That said, although there is no specific tax on inheritance in India today, beneficiaries may still be liable to pay tax on income generated from the inherited assets. For instance, if you inherit a property and later sell it, capital gains tax may apply on the profit made from that sale. Similarly, if the inherited asset generates income (like rent, interest, or dividends), that income is taxable in your hands.
This topic remains relevant because there are ongoing discussions about reintroducing inheritance tax as a way to address wealth inequality. Hence, it’s essential for business owners, families with ancestral assets, and financial planners to stay informed about any legislative changes.
For individuals managing inherited wealth, it’s advisable to maintain proper documentation, get valuations done at the time of inheritance, and include such assets in your tax planning. Staying compliant ensures you avoid scrutiny from tax authorities in case of future audits.
If you're unsure how to handle income from inherited assets or want to plan your finances better, you can explore expert guidance on Indian taxation at FinTax24’s Income Tax Solutions.
In summary, while Inheritance Tax is currently not levied in India, understanding its implications and being prepared for any potential policy changes is a smart financial move.