Inheriting property can be a complex issue, particularly when it comes to tax implications. In this article, we’ll explore the best way to inherit a property, whether it’s through a gift or a sale, and how to navigate the various scenarios that may arise.
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Let’s start with the case where both parents and children are non-resident Indians (NRIs). In this scenario, the best approach is for the NRI parents to gift the property to their children, who can then come to India to sell the property and take the money abroad. This avoids the issue of double taxation, as the children will not be subject to the 20% TDS that is applicable to remittances.
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If the parents are resident Indians and the children are non-residents, gifting the property to the children is still the best approach. If the parents were to sell the property and then gift the money to their children, they would be subject to taxes in India, as well as the 20% TDS on the remittance. By gifting the property instead, the children can sell it and take the money abroad without being subject to the TDS.
Finally, in the rare scenario where the parents are NRI and the children are resident Indians, gifting the property to the children is still the best approach. This allows the children to sell the property without having to take the money abroad, avoiding the TDS.
It’s worth noting that this advice is specific to the current tax laws in India, and these laws may change in the future. It’s important to consult with a qualified chartered accountant to ensure that you’re following the most up-to-date guidelines.
In summary, if you’re inheriting a property and want to sell it, the best approach is to have the property gifted to you first, rather than having your parents sell it and gift you the money. By doing so, you can avoid the 20% TDS that is applicable on remittances and ensure that you’re following the most tax-efficient approach.
If you have any questions or concerns about gifting or inheriting property, it’s important to speak with a qualified professional who can guide you through the process. With the right advice and planning, you can ensure that you’re making the most of your inheritance and avoiding any unnecessary tax liabilities.