India Continues to Have No Inheritance Tax—But Here’s What Heirs Should Know
India remains one of the few large economies in the world without an inheritance tax. Whether you’re inheriting property, money, jewelry, shares, or any asset—there is no tax levied simply for receiving these assets. This has profound implications for families planning their succession. Let’s break down what that means, with facts, figures, and rules you should know.
Historical Context
Estate Duty Act (1953-1985): India did have an inheritance or estate tax until 1985, when the Estate Duty Act was abolished due to its high rates (up to 85% for properties over ₹20 lakhs) and excessive administrative costs.
Global Contrast: Countries like the US, UK, and much of Europe levy inheritance or estate tax ranging between 12.5% to 40%.
Current Facts (2025)
No Inheritance Tax: As of 2025, there is no inheritance tax for residents or NRIs—succession of property, cash, stocks, gold, etc. is tax-free at the time of transfer.
NRIs can inherit assets without restriction or tax at the point of inheritance.
Gifts from relatives, including inherited assets, are not taxed at the point of receipt.
Taxation on Income and Sales
The absence of inheritance tax does not mean heirs avoid taxation altogether.
Income Tax: Any income earned from inherited assets (e.g. rental income from property, dividends from shares, interest from deposits) is taxable as part of your regular income.
Capital Gains Tax on Sale: When you sell inherited assets, you pay capital gains tax on the difference between sale price and the original purchase price paid by your parent or relative.
Holding Period: The holding period is counted from when your parent first bought the asset.
Cost of Acquisition: You assume their cost base, not the market value when inherited.
Long Term Capital Gains (LTCG): On immovable property, LTCG is usually taxed at 20% (with indexation) or 12.5% (without indexation); and exemption is available up to ₹1.25 lakh per year.
Example: If you sell an inherited flat worth ₹1.65 crore, and your parent paid ₹1.24 crore, capital gains tax would apply to the difference after indexation; typically about ₹8 lakh tax on ₹40 lakh profit.
Key Case Studies and Legal Rulings
Recent Bombay High Court Ruling (2025): Minor wording in the law allowed a taxpayer to save over ₹1 crore in LTCG on inherited property sale by proper use of Section 54 relief.
Reliefs for Heirs: Section 54 allows exemption for reinvesting capital gains in a new house (up to ₹2 crore gains, or ₹10 crore from 2024 onwards).
Summary Table
Final Thoughts
Despite debates and periodic suggestions, India’s stance is unchanged: succession is tax-free, but income and gains from inherited assets are taxable. This lets families plan inheritance efficiently—with awareness of future tax liabilities when using or selling assets.