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How is inherited property to be declared in ITR?


Q – I have received two houses as a gift from my grandmother but I forgot to mention the gift in the ITR of 2017. What shall be the consequences if I ever sell those houses?

– Name withheld

As per provisions of Section 56(2) of the Income Tax Act, 1961, (Act), in case a person receives any immovable property without consideration having the stamp duty value of more than 50,000, then the same shall be chargeable to income tax as income from other sources. However, in case such immovable property is received from a specified relative (grandparents are included under the definition of relative), then gift of such property is not taxable in the hands of the recipient.

In the instant case, we understand that you have received two residential houses (situated in India) as gift from your grandmother in 2017. Since, for the purpose of section 56(2) of the Act, your grandmother falls under the definition of specified relatives, thus no taxability will arise in your hands and hence no income (including exempt income) was required to be offered to tax / reported in the tax return form, vis-a- vis the gift transaction.

However, considering that you received two houses, there would be implications with respect to reporting of taxable income from house property, depending upon the exact facts of your case such as number of houses owned, whether self- occupied or let out et, which will need to be separately evaluated. Please note that there could be interest and penal consequences in case of mis/ under- reporting of such taxable income.

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

At the time of sale of the houses, in case of a scrutiny, the Tax Authorities may ask for documentary evidence, to substantiate the receipt of the property as gift from the defined relative, cost of acquisition, period of holding, past disclosures in the tax return forms etc. Further, in relation to the period of holding upon sale of assets, it is to be noted the period for which the previous owner (your grandmother) held these shares, will also be considered to calculate the total period of holding for classifying the asset as short-term / long-term capital asset. Also, the cost of acquisition of such houses in your hands will be the cost for which your grandmother acquired it. Further, as per the provisions of the Act, in case the LTCA was acquired by your grandmother before 1st April 2001, the cost of acquisition shall be the actual cost of the property or Fair Market Value (‘FMV’) as on 01.04.2001 (not exceeding 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 queries, write to to get them answered by experts.

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