1Do I pay tax when I inherit property?
No — inheriting property under a will or succession is fully tax-free. Tax only arises when you later sell it, in the form of capital gains computed from the original owner's cost.
Home -> Articles
ArticleInheriting a house or land is itself tax-free, but the tax question arrives when you sell it — and the rules around the original owner's cost and holding period surprise many people. Here's how tax on selling inherited property works. Exact rates and indexation are confirmed for your case.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-13
Quick answer
Inheriting property is tax-free, but selling it triggers capital gains based on the original owner's cost and holding period. Here's how it works.
Receiving property under a will or inheritance is fully exempt — there's no tax simply for inheriting. The capital-gains question only arises when you sell. So plan for the tax at the point of sale, not at the point of inheritance.
For computing the gain, your cost is the price the original owner paid (or the value as on a base date for older properties), not zero — and the holding period includes the time the original owner held it. This usually means the sale qualifies as long-term, with the more favourable treatment that brings.
From the sale price you can subtract the original cost, any cost of improvements made over the years, and transfer expenses like brokerage and stamp duty. Keep records of renovations and improvements — they reduce the taxable gain and are often forgotten.
Long-term capital gains on property can be sheltered by reinvesting — in another house under Section 54, or in specified bonds under Section 54EC — within the prescribed time limits. If you won't reinvest before the filing due date, park the gain in the Capital Gains Account Scheme to preserve the exemption.
Where several heirs inherit together, the gain on sale is split in their ownership shares and taxed in each person's hands. Getting the ownership shares and each person's reinvestment right keeps the whole family's tax correct — coordinate before signing the sale.
No — inheriting property under a will or succession is fully tax-free. Tax only arises when you later sell it, in the form of capital gains computed from the original owner's cost.
You use the original owner's purchase cost (or the value on a base date for old properties), not zero , and the holding period includes their ownership — so the sale usually qualifies as long-term.
By reinvesting the long-term gain in another house (Section 54) or specified bonds (54EC) within the time limits , and by adding all improvement and transfer costs to your base. We'll apply the current rates.
Selling a property you inherited? Write to the firm before you sign — the cost base and reinvestment timing decide the tax.