Inherited my father's house and planning to sell it for Rs 1Cr. How much tax will I actually pay?

You do not have to pay tax on the entire Rs 1Cr sale amount because Indian tax laws allow you to deduct the original purchase price and improvement costs before calculating your profit. When you inherit a property in India, the actual act of inheriting it does not attract any tax right now. The tax liability only kicks in when you decide to sell or rent out that asset.

In your case of selling the house, you will be liable to pay Long-Term Capital Gains (LTCG) tax on the actual profits you make. Let us break down the exact math based on your numbers. Your father originally purchased the house for Rs 20L and you spent Rs 40L on improvements.

This brings your total cost basis to Rs 60L. When you sell the property today for Rs 1Cr, your taxable profit is simply the sale price minus that total cost. So Rs 1Cr minus Rs 60L gives you a capital gain of Rs 40L.

Under the current tax laws, this Rs 40L profit triggers an LTCG tax of 12.5%. Calculating 12.5% on that Rs 40L profit means your actual tax payout will be exactly Rs 5L. This leaves you with Rs 95L in hand to comfortably plan for your children's education.

It is highly efficient right now because India abolished its inheritance tax back in 1985. While there is talk of bringing it back in the future, currently you only worry about the capital gains on the sale.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.