No need for NRI’s to pay tax on inherited property in India
The Indian real estate market is always attractive to Non resident Indians. This is because it is one of the safest investments as it gives better returns over time. Many NRIs own multiple properties in India and among them some properties are inherited.
Real estate also has certain tax challenges like other investments. According to an expert, there is no inheritance tax in India so if an NRI inherits an ancestral or parental property then no inheritance tax is required to pay.
According to Income Tax Act in India, if an individual either NRI or resident has more than one property, then one of the houses will be considered as self-occupied and is excluded from tax payment and no income tax is charged on self occupied property. The other house , whether it is put on rent or not, will be considered to be given on rent and payment of property tax is required on the second property.
Once you inherit an ancestral property, you automatically become the owner of the property and same law or tax rule apply if you had bought the property. For an NRI, if the inherited property is the only property, then no income tax payment is required but if the NRI possesses more properties in India then computing notional income on the second property is required.
To calculate notional income, an NRI has to consider a reasonable rent for the house in an open market. Then from such rent, the municipal taxes paid will be deducted along with the fixed allowance of 30 percent of the reasonable rent and the rest of the amount would be taxable as income from house property.
The NRI also has to pay wealth tax on property for which the valuation has to be done. The wealth tax will be calculated as it is stated in the Indian Wealth Tax act, which is one percent of the total amount exceeding Rs 30 lakhs. Only after this, NRIs can file income tax and wealth tax returns in India.
Click here for related forum discussion
Related Property Tax News:
Proposal to hike property tax in Bangalore
Bangalore Property tax deadline
Ancestral property, Income Tax Act in India, Indian real estate market, inheritance tax, Non-Resident Indians, Properties in India, property tax, Real estate investment
