Tax on inherited and gifted property: receiving it, and selling it later

The short answer

India has no inheritance tax or estate duty. A property you inherit under a will or by succession is not income in your hands. A property gifted to you by a relative — spouse, parent, child, sibling and others the law lists — is not taxed either.

A property received without consideration from someone who is not a relative is taxed as your income if its stamp duty value exceeds ₹50,000: the whole stamp duty value is taxed under 'income from other sources' at your slab rates. This is section 92 of the Income-tax Act, 2025 (section 56(2)(x) of the 1961 Act). Gifts received on marriage, or under a will or by inheritance, are exempt whoever gives them.

When you sell an inherited or gifted property, there is capital gains tax in the usual way. But the cost is what the previous owner paid (plus improvements by them or you), and the previous owner's holding period is added to yours (section 73 of the 2025 Act, section 49 of the 1961 Act). If the previous owner acquired the property before 1 April 2001, you can use its fair market value on that date as the cost.

If you gift a property to your spouse, the income from it — rent, and any capital gain when it is sold — is generally taxed in your hands, not your spouse's, under the clubbing rules.

A note on section numbers: the Income-tax Act, 2025 has applied from 1 April 2026 (the start of tax year 2026-27). Anything that happened before that date — a sale, a rent payment, a deduction — is governed by the Income-tax Act, 1961 and its section numbers. This guide gives both numbers where the new one has been confirmed.

Receiving a property: inheritance

Property passing under a will, by intestate succession under personal law, or by survivorship in a joint family is not taxed when received. There is nothing to report as income in the year you inherit.

You will still need to establish your title: probate of the will where the law requires it, a succession or legal heir certificate, a family settlement or relinquishment deed among the heirs where several inherit, and mutation in the municipal and revenue records. These are legal steps, not tax steps, but a buyer will ask for them when you sell. See the guide on property mutation.

Once you own the property, any rent from it is your income under house property, and municipal tax is yours to pay.

Receiving a property: gifts

A gift of immovable property must be made by a registered gift deed, stamped as the state requires. Many states charge a lower stamp duty on gifts to close family; see the guide on gift deeds and the stamp duty calculator.

From a relative: exempt from income tax. 'Relative' for an individual covers the spouse; brother or sister; brother or sister of the spouse; brother or sister of either parent; any lineal ascendant or descendant (parents, grandparents, children, grandchildren); any lineal ascendant or descendant of the spouse; and the spouse of any of these persons. Note that a cousin or a friend is not a relative.

From a non-relative: if the stamp duty value of the property exceeds ₹50,000, the whole stamp duty value is taxed as your income under section 92 of the 2025 Act (section 56(2)(x) of the 1961 Act).

Also exempt whoever gives it: property received on the occasion of your marriage, under a will or by inheritance, in contemplation of the death of the giver, and from certain institutions.

Buying below the stamp duty value: the same section also catches a purchase from anyone (relative or not) for less than the stamp duty value where the difference exceeds the higher of ₹50,000 and 10% of the price. The difference is taxed as your income. A family sale at a nominal price is therefore taxable on the buyer's side unless structured as a gift.

Selling it later: cost of acquisition

Your cost is the cost to the previous owner — the last owner who acquired the property by purchase or in some other way not listed as a gift, inheritance or similar mode — plus the cost of any improvements made by the previous owner or by you. This is section 73 of the 2025 Act (section 49(1) of the 1961 Act).

If the previous owner acquired the property before 1 April 2001, you can instead use its fair market value on 1 April 2001, capped at the stamp duty value on that date. This option under section 55 of the 1961 Act is carried forward in the 2025 Act. For old family homes, this is usually the most important number in the calculation; get a registered valuer's report.

If you were taxed on a gift from a non-relative under section 92 (or 56(2)(x)), your cost when you sell is the value that was taxed in your hands.

Expenses on the inheritance itself — probate fees, legal costs of the succession — have been allowed as part of the cost in some cases where they were needed to clear the title; keep the receipts and ask your adviser.

Selling it later: holding period and the rate

The previous owner's holding period is added to yours. A flat your mother bought in 2008 and gifted to you in 2026 is a long-term asset if you sell it in 2026.

The rate is therefore usually the long-term rate: 12.5% without indexation, or, for a resident individual or HUF selling land or a building acquired before 23 July 2024, the lower of that and 20% with indexation. See the guide on long-term capital gains on property.

Indexation from when? Courts have held that indexation for an inherited asset can run from the year the previous owner acquired it (or from 2001-02, where the 1 April 2001 value is used), not from the year you inherited. Where you inherited on or after 23 July 2024 a property the previous owner acquired before that date, whether you have the indexed option is a point to settle with your chartered accountant before you file.

The reinvestment exemptions apply to an heir or donee in the same way: section 82 (earlier 54) on selling an inherited house, section 86 (earlier 54F) on selling inherited land, and section 85 (earlier 54EC) bonds. See the guide on those exemptions.

Worked example: selling a parent's flat

Illustrative numbers only. A resident's father bought a flat in 1995 for ₹8,00,000. He died in 2019 and the flat passed to her. A registered valuer puts its fair market value on 1 April 2001 at ₹25,00,000; the stamp duty value on that date was ₹22,00,000, so the 2001 cost is capped at ₹22,00,000. She sells in 2026-27 for ₹1,60,00,000, paying ₹1,60,000 brokerage.

Net consideration: ₹1,58,40,000. Holding period: father's from 1995, plus hers — long-term.

Option A, 12.5% without indexation: gain = ₹1,58,40,000 − ₹22,00,000 = ₹1,36,40,000. Tax = ₹17,05,000.

Option B, 20% with indexation: indexed cost = ₹22,00,000 × 384 ÷ 100 = ₹84,48,000. Gain = ₹1,58,40,000 − ₹84,48,000 = ₹73,92,000. Tax = ₹14,78,400.

Option B is lower. Her total income including the gain is above ₹50 lakh but under ₹1 crore, so surcharge is 10%: ₹1,47,840. Cess at 4% on ₹16,26,240: ₹65,050. Total: about ₹16,91,290.

If she reinvests the ₹73,92,000 gain in a new house within the time allowed, the tax falls to nil under section 82. Or she can put up to ₹50 lakh into section 85 bonds within six months and pay tax on the rest.

If she had inherited the flat jointly with her brother in equal shares, each would compute the gain on half: half the price, half the cost, each with their own exemptions and their own surcharge.

Worked example: a gift from a non-relative

Illustrative numbers only. A family friend gifts a resident a plot with a stamp duty value of ₹40,00,000. The friend is not a relative and it is not a marriage gift. The ₹40,00,000 is taxed as her income from other sources in that tax year, at slab rates. If her other income already puts her in the 30% bracket, the extra tax is about 30% plus 4% cess on ₹40,00,000, roughly ₹12,48,000, and more if the addition takes her income over a surcharge threshold.

Three years later she sells the plot for ₹50,00,000. Her cost is ₹40,00,000, the value already taxed. Long-term gain: ₹10,00,000, taxed at 12.5%.

Had the same plot come from her mother's sister (a relative), there would have been no tax on receipt, and her cost on sale would have been her aunt's cost.

Clubbing: gifts to a spouse, a daughter-in-law or a minor child

If you transfer a property to your spouse without adequate consideration (other than under an agreement to live apart), the income from it is taxed as yours. This is the clubbing rule in section 99 of the 2025 Act (section 64 of the 1961 Act). It covers rent and also the capital gain when the spouse sells. For house property specifically, the 1961 Act also treated you as the 'deemed owner' of a house transferred to your spouse in this way (section 27), and the 2025 Act carries the rule forward.

The same applies to a property transferred without adequate consideration to your son's wife.

Income of a minor child — including rent from property gifted to the child — is generally clubbed with the income of the parent whose income is higher, subject to a small exemption per child.

Clubbing applies to the income from the gifted property, not to income on that income: if the spouse reinvests the rent and earns interest on it, that interest is the spouse's own income.

Clubbing does not apply to gifts to adult children, parents or siblings. Once gifted, the income and the gain on sale are theirs.

Illustrative example: a husband gifts his wife a flat that earns rent of ₹4,80,000 a year. The rent is added to the husband's income, not hers. If she sells it later with a long-term gain of ₹30,00,000, that gain is also taxed in his hands, using his cost and holding period.

Before you sell a parent's or family property

Settle the title first: probate or succession certificate where needed, consent or relinquishment by other heirs, mutation into the seller's name. A buyer's lawyer and lender will ask for each.

Collect the original purchase deed and payment proof of the previous owner, and improvement bills; if they are lost, the 1 April 2001 value route (with a valuer's report) is often the practical alternative for older property.

If any heir is a non-resident, the buyer must deduct tax on that heir's share at the non-resident rates; see the guide on TDS when buying from an NRI.

Plan the reinvestment and its deadlines before the sale deed, not after.

Common mistakes

Thinking you must pay tax when you inherit. You do not.

Using the date of inheritance as the purchase date and paying short-term tax on a sale that is long-term.

Taking nil as the cost because the original deed is lost, instead of using the 1 April 2001 value for pre-2001 property.

Forgetting the stamp duty value cap on the 1 April 2001 value.

Assuming a gift from a cousin or a friend is tax-free. Only listed relatives qualify.

Selling family property at a nominal price, which can create a taxable income for the buyer on the gap to stamp duty value.

Gifting property to a spouse to split rent, and then declaring the rent in the spouse's return. It is clubbed with the giver's income.

This is general information, not tax or legal advice. Tax law, rates and forms change with each Finance Act; confirm how the rules apply to your own facts with a chartered accountant before you sign, pay or file.

Common questions

Sources

• Income-tax Act, 2025: section 73 (cost with reference to certain modes of acquisition, including gift and inheritance; holding period of the previous owner), section 92 (gifts and receipts of property; relatives), section 99 (clubbing), sections 82, 85, 86 and 197; incometaxindia.gov.in; checked 2 October 2026
• Income-tax Act, 1961: sections 2(42A), 27, 47(iii), 49, 55, 56(2)(x) and 64; indiacode.nic.in; checked 2 October 2026
• Transfer of Property Act, 1882, section 123, and Registration Act, 1908, section 17 (registered gift deed); indiacode.nic.in
• Bombay High Court, CIT v. Manjula J. Shah (2011) — indexation for an asset acquired by gift from the year the previous owner held it; checked 2 October 2026

Last checked 2026-10-02.