Income Tax Return: How money received via Will or Inheritance from abroad is taxed in India

financialexpress.com:

Receipt of money under will or inheritance is exempt from tax in India. However, residents (and ordinarily resident) taxpayers are mandatorily required to furnish the details of all foreign assets or accounts in respect of which they are a beneficial owner, a beneficiary or the legal owner, in the Schedule FA.

A taxpayer acquiring foreign assets by way of inheritance would be required to furnish the details of the same in Schedule FA (Foreign Asset) of ITR-2 or ITR-3 (as applicable). Failure to furnish such details in Schedule FA may attract a penalty of Rs. 10 lakh u/s 43 of the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act 2015.

Also, as such receipt of money on inheritance is exempt under section 56(2)(x) in the hands of the Indian recipient, it would be advisable to also show it under the Schedule of Exempt Income (Schedule EI) in the Income Tax Return, as applicable.

Inheritance tax or Estate Tax has been abolished in India since 1985. Therefore, a taxpayer being a beneficiary in the will of a deceased person, inheriting any capital asset or sum of money shall not be liable to any tax under the head “Capital Gains” or “Income from Other Sources”. Section 47(iii) of the IT Act does not regard the transfer of capital assets under a will as a “transfer”.

Further, section 56(2)(x) of the IT Act specifically excludes such transfer under will or inheritance from the purview of gift tax in the hands of the recipient. Accordingly, there would be no double taxation for the resident taxpayer to be eligible to claim credit of the taxes paid abroad.

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The aforementioned Schedule FA would be required to be furnished only by taxpayer who are