Property Inherited From Relatives: What Are Your Legal And Tax Rights?

Delhi-based Ritika Verma’s uncle passed away two years back and left behind an apartment in south Delhi. Her cousins thought it was straightforward. Turns out, it wasn't. One cousin immediately panicked thinking she owed inheritance tax. Another found out there was a Rs 15 lakh bank loan against the property. The third didn’t know she needed to register it in her name.

It took them a while to figure out what was actually their responsibility and what wasn’t.

That’s when Ritika realised most people have no clue about their rights when inheriting property. So, let us break down what actually happens when you inherit.

Who Gets What?

First thing: if there’s a Will, you inherit what it says. If there is no Will, then the succession laws take over. This is where things get interesting. Until recently, daughters couldn’t claim equal shares in ancestral property. In 2020, the Supreme Court finally ruled in the Vineeta Sharma v. Rakesh Sharma case that daughters have the same rights as sons, even if their father died years before the law changed.

“Before that, women from certain communities had almost no inheritance rights at all. Mary Roy, a Syrian Christian woman from Kerala, fought for nearly 40 years in court to get her share. The Supreme Court upheld her claim in 1986, essentially saying that discriminatory community laws couldn’t stand. These cases changed everything for women inheriting property in India,” says Shraddha Nileshwar, head-will and estate planning at 1 Finance, a personal finance platform.

What About Taxes?

Here’s what confused Ritika’s cousins the most: you don’t pay tax on inheritance itself. You don’t owe anything just by inheriting. The tax kicks in when you sell. And here’s where it works in your favour. Say your grandfather bought a house in 1990 for Rs 3 lakh. He passed away in 2010 when it’s worth Rs 40 lakh. You inherit it and sell it for Rs 70 lakh in 2023. You only pay capital gains tax on the difference between Rs 40 lakh and Rs 70 lakh, not from Rs 3 lakh. That’s a massive advantage. If you hold it for over two years, you get long-term capital gains tax at 20 per cent with indexation. If it’s rent from inherited property, it’s taxed as regular income. But a property sitting idle isn’t taxed.

What About That Loan and Bills?

You inherit the debts, too. That Rs 15 lakh loan? Ritika’s cousins had to pay it. Outstanding property taxes? Their responsibility now. But the court has limits on this. You're only liable for monetary debts tied to the property, not personal obligations of the person who died.

“So, if your relative was a contractor who promised someone a job, you can’t be forced to do it. The Supreme Court confirmed this in Vinayak Purshottam Dube v. Jayashree Padamkar Bhat. Also, creditors can’t come after your personal money. They can only claim against the inherited property’s value. If the debt is Rs 20 lakh and the property is worth Rs 50 lakh, that's what you owe. They can’t touch your other assets,” says Nileshwar.

What Do You Actually Do?

Get the property title checked immediately. There might be liens or disputes you don’t know about. Register it in your name as soon as possible. For bank accounts and shares, get a succession certificate from the court. It’s your proof of ownership. Before selling, talk to a tax advisor. There are exemptions under Section 54 if you reinvest in another home. Remember that rules change based on your religion and personal law. The thing is, inheritance can be great or painful depending on whether you understand the game.

The Bottom Line

Don't panic about taxes the moment you inherit something. “Most people unnecessarily assume they owe money right away, but the real tax aspect only comes into play when you decide to sell years down the line. By then, you have got a massive cost base advantage working in your favour that actually protects you. You inherit debts along with assets, but your liability is generally limited to the estate, not your personal assets. Creditors can’t pursue you personally or force you to fulfil the deceased’s obligations,” says Nileshwar.

Don’t delay succession certificates and registration formalities; timely paperwork protects your claim to assets like bank accounts and shares. Most importantly, understand the laws that apply to you. Inheritance rights vary based on personal laws and have evolved over time. So, getting clarity early can save significant complications later.

FAQs

1. Do I need to pay tax when I inherit a property?

Not right away. In fact, there is no inheritance tax in India. Tax is usually paid when you sell your property and it is called capital gains tax.

2. Will I be held responsible for any loans/dues on the property I inherit?

Yes. All home loans, property taxes or dues on the property being inherited need to be paid off by the legal heir, although you are typically only responsible up to the amount of your inherited estate.

3. What documentation is required if I inherit a property?

Have the title of the property verified and transfer the mutation/registration to your name. Also, apply for a succession certificate or probate, if necessary.