The laws surrounding real estate are often confusing. While the legal work might seem daunting, the right guidance can often make the difference between stress-free property ownership now and legal hassles later.
We spoke to our legal expert to decode some of the confusion around property received through inheritance.
What is inheritance?
According to the classic definition, inheritance is the practice of transferring property, titles, debts, rights, and obligations to the legal heir of a person upon the death of that person either by way of ‘will’ or through the prevalent laws of succession.
In India, the laws pertaining to succession include the Indian Succession Act, 1925, Hindu Succession Act, 1956, and Shariat Law.
What should a person do after inheriting a property?
According to experts, a person must take care of the:
The legalities: After inheriting a property, you must get it transferred in your name in the government records. To do so, you must have valid proof to claim your inheritance.
In terms of documentation, a Will or Will with probate or succession certificate is a must to transfer the property in the beneficiary’s name. If the owner of the property dies intestate or without writing a Will, then the property is divided into equal shares among all the legal heirs according to the religious laws governing the deceased.
Mutation of property title: Once property gets transferred in your name, the next important task is to apply for mutation of property title. In simple words, the mutation is the change of title ownership in the records of the sub-registrar’s office of the local municipal body. Every municipal body maintains a record of the property ownership to collect the property tax from the rightful owner.
The liabilities: If the property has an outstanding home loan, then the person inheriting will have to pay the outstanding loan. However, if there’s home loan insurance, the insurer will pay the outstanding amount to the lender. Similarly, if the property you inherit has been let out, you are obliged to adhere to the lease agreement signed between the lessee (the predecessor) and the lessor.
What about taxes?
At the outset, it should be clear that the incidence of inheritance of property itself does not attract any taxes. The receiver of a gift or inheritance is not liable to pay tax merely due to receipt of the property.
However, once the property has been received, the inheritor might either continue to hold the property, or he may choose to sell it. And that’s when the taxes come in. If the inheritor sells the property, he will be liable to pay capital gains tax on the sale of the property.
If the inheritor retains the property, he is deemed to be the ‘owner’ of the property. Every owner of a property has to pay income tax for the same under the head of “Income from House Property” on an annual basis.
The blog is very informative and useful. Thank you for sharing.
Thank you for the information shared about the property inheritance.