ITR Filing: Should one report inheritance in income-tax return?

Tax Laws

A 70-year-old woman has received Rs 2 crore by way of inheritance. India does not levy an inheritance tax on assets received from a deceased individual. Could you please advise whether this amount needs to be reported in her ITR? Under which section or schedule should it be disclosed? Are there any documents or declarations required to support the entry?

Expert advice: Yes, you are right. There is no inheritance tax in India. Earlier, inheritance tax was levied on the estate of the deceased under the Estate Duty Act, 1953 but it was abolished.

After the gift tax act was abolished, the recipient is required to pay tax on gifts if the aggregate received during the year exceeds Rs 50,000. Section 56(2)(x) of the income- tax act provides says that gifts received beyond this limit are treated as recipient's income. However, there are exceptions under this section, including any sum of money or property received by way of a will or inheritance.

Therefore, the lady has no tax liability at the time of inheriting the assets. However, she will have to pay capital gains tax whenever she sells the inherited asset or assets.

It is also important to note the difference between exempt income and receipts not treated as income. Taxpayers are required to report exempt income under the EI schedule of ITRs but since the money or property received as inheritance is not considered income, it is not required to be reported in the returns.

So, she need not disclose the inheritance in her ITR. However, it is strongly recommended that she preserve all relevant documents such as the copy of the will, probate, and communication from the administrator of the estate or executors of the will. These may be required to establish the source of funds if questioned by the income-tax department.

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