How to declare inherited property in ITR?

– Name withheld

As per the provisions of section 56(2) of the Income-tax Act, 1961, (the Act), if a person receives without consideration any immovable property, the stamp duty value of which exceeds 50,000, then he will be chargeable to income-tax as income from other sources. However, if such immovable property is received from a specified relative (grandparents are included under the definition of relative), the gift of such property is not taxable in the hands of the recipient.

In the present case, we understand that you have received two residential houses (located in India) as a gift from your grandmother in 2017. Since, for the purpose of section 56(2) of the Act, your grandmother comes under the specified definition. Relatives, thus no taxability would arise in your hands and hence no income (including exempted income) was required to be taxed/reported in the tax return form, as compared to gift transactions.

However, given that you have got two houses, depending on the exact facts of your case, there will be implications with respect to reporting of taxable income from house property, such as the number of houses owned, whether self-occupied or rented out, etc. needs to be assessed separately. Please note that there may be interest and penal consequences in case of incorrect/short reporting of such taxable income.

Further, in case your total taxable income exceeds, the details of house properties are also required to be reported in Schedule AL. 50 lakhs for the respective applicable financial years.

At the time of sale of houses, in case of enquiry, the tax authorities may call for documentary evidence, to certify the receipt of property as gift from defined relative, cost of acquisition, period of holding, tax return form in previous disclosures etc. . Further, with regard to the period of holding on sale of the asset, it should be noted that the period of holding of these shares with the previous owner (your grandmother) will also be considered for computing the total period of holding. To classify the asset as short-term/long-term capital asset. Also, the cost of acquiring such houses in your hands will be the cost for which your grandmother acquired it. Further, as per the provisions of the Act, if the LTCA was acquired by your grandmother before 1st April 2001, the cost of acquisition shall be the actual cost of the property or the fair market value (‘FMV’) as on 01.04. (not exceeding the stamp duty value of the property).

Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG in India. If you have any personal finance questions, write them to minmoney@livemint.com to get answered by the experts.