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Originally posted by shriya

Hi CD's

My parents in India own a residential property there which they want to give me as Inheritance. I am a citizen here and live in Ontario. After I inherit, I plan to sell this and transfer money to Canada. My relatives both in India and Canada are interested in buying this property. I would like to know what could be the tax implications here when money is wired to Canada and in India if any. I read somewhere inheritance money is not taxed here. But even if so what legal documentation would I require to prove that this money which I get is in fact inherited. Would I need the help of a lawyer here to do this?

Thank you

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Congratulations upon the inheritance of the property and good luck with the windfall. You do not need a lawyer here in Canada for any reason, unless you already have one taking care of your interests. There are NO TAXES here in Canada on any inheritance.

Also, you will get a chance to invest the same there in India at a very good rate, better than the Canadian Interest bearing investments, after the sale of the property. Also, when you pay taxes there in India on the interest money, you can claim exemption for tax purposes here in Canada

If your Parents sell the property and then transfer out the funds to you as an inheritance, you will have a quicker possession of the cash portion of the sale. More on it under this.

The AUDITOR will do the math to get you all of the benefits out of the sale of the property. Here are some facts that they look for. First the date of purchase and the price paid and the cost of any improvements that your Parents incurred, which becomes the Costs associated with the property.
Then he looks for the date of sale. If it is more than THREE years, then the capital gains made are totally exempt, except that they want you to either re-invest the gains made or lock yourself into Designated Governement Security/ies, such as Rural Electrification Bonds or Railway Improvement Bonds bearing 6%-7% per annum for a specified period and after which you can repatriate the total sum, paying taxes ONLY ON THE INTEREST Earned. The initial deposit is returned to you free, without any tax. Please bear in mind that the property is based in India and all of the transactions take place in Indian Currency on your Parents behalf. When you inherit, you can take out all of the monies, out of India, after transferring it into an account there, which you might already have or need to open one, which is NON RESIDENT ORDINARY Rupee account.

Depending upon the number of years the property was held by your Parents, starting with the first year to the last, the Income tax Department has maintained and published a table with the cost of living INDEX and they use this INDEX to provide your Parents with relief in the determination of how much of the profits of sale will be exempt from the taxes they charge. It is not a complicated math, but without an example it becomes difficult to understand.

Please see if these links help. Take your time to understand.
http://www.thewealthwisher.com/2010/09/07/what-is-cost-inflation-index-and-indexation/
http://taxguru.in/income-tax/cost-inflation-index-meaning-and-index-for-all-the-years.html

If and when you inherit and you have a will to support such an inheritance, you can save the original and make a few copies of the same for all of your requirements. Instead of taking the possession of the property, you decide to sell the same, then, after the sale the accounting people will use this Index and Table to determine the Capital Gains and tell you how much of the sum is free to take out of India and how much is left there to invest and in what vehicles and at what rate and for how long. All of these change and the Auditors know all of these and they will explain to you all of the details at that time.

IT IS NOT ILLEGAL TO HAVE BANK ACCOUNTS OUTSIDE OF CANADA AND ALSO INVES MONEY ABROAD. Only thing is that they want you to report any amount over and above $100,000.00, currently, and any profits made on such investments in your tax return. Things could change. So, keep your eye open.

Your Parents can sell this property now or any time OR you can do the same after the inheritance to any one, prefrably at arms length people. This is to avoid any complicity later. If you take possession of the property and use it, then you will lose the INDEXATION component, which the property has, because your Parents might have held it for a very long period, but your date of inheritance becomes the date of reckoning for your acquisition. So, sell it immediately after inheritance.

FH.

First get the Property Value Established. It is called the Market Value. They will normally look into the last sale of a similar property or one very close by to establish its value. After which you DIVIDE and collect your share.

The funds received from your Brother, which will be in Rupees, can only be deposited into an NRO Account of yours.

Since it is gift through your Fathers will, you must get a copy of it and take it to an accountant and register it and collect the sum from your Brother and ask him to deposit into the NRO A/C.

What ever is left after your gifting, the balance can be transferred out of India from any bank. See a Bank Manager for the same. They do it every day. It is a couple hours work. Some Accountants will do it for you.

As regards the gift. There is NO TAX If the gift is from Father TO Son. when you gift it to a Daughter in law might attract Taxes. Talk to the Accountant. So, work things out through your son for the gift angle.

Hope this helps you.

FH.

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Originally posted by Many

My father's Will gives me 1/4 share of his flat in Maharashtra; the other sibling is paying me equivalent money/indian Rs 15 lakhs, after I sign NOC in his favour.
Question:
1)Can I deposit the cheque in my NRO a/c without any questions being asked?
2) If I give 10-12 lakhs/Rs from my NRO a/c to my NRI daughter-in-law to buy a car, will it be taxed?

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