Understanding the Process of Ancestral Property Under Hindu Law

In India, owning a house, residential property, flat or apartment is considered a mark of financial success. Given the phenomenal rate of appreciation in real estate, Indians often look at creating real estate assets for their future generations. Ancestral or inherited property is often viewed as a means of financial security and also as a blessing from the ancestors in the family.

To know your rights as an heir or a coparcener, it is important to understand the laws regarding ancestral property in the country. Clarity regarding the rights, transfer, and sale of such property also becomes important when it comes to calculating the capital gains on the sale of an ancestral property.

What is ancestral property?

Ancestral property, under Hindu law, is property that has been passed on to the heirs through several generations. According to the Hindu Succession Act 1956, any land or property that is inherited by a Hindu male from his father, his paternal grandfather, and his paternal great-grandfather is considered ancestral property. So to qualify as ancestral property, there are two conditions to be fulfilled –

1. The property must be held by the Hindu Undivided Family (HUF) for four generations.
2. It must remain undivided or unpartitioned during the entire time.

In the judicial rulings vide Md. Hussain v. Kisheva (1937) and Maktul v. Manbhari (1958), the courts have clarified that any property inherited through the maternal side of the family cannot be considered ancestral property.

Who holds the rights to an ancestral property?

According to the law passed in 1956, four generations of male heirs can claim a right over ancestral property. Let us understand this with the help of an example. If you have inherited an ancestral property, you, your sons, their sons and grandsons hold a legal claim over the property. This right is gained at birth. So, if you own an ancestral property, your sons, grandsons, and great-grandsons gain a right to the property as soon as they are born. Each person with a right over ancestral property is called an heir or a coparcener. An heir can demand the partition or division of the ancestral property, and each has the right to an equal share.

Can daughters be coparceners?

Prior to 2005, daughters were not considered coparceners of ancestral property under Hindu law. In the Hindu Undivided Family (HUF) unit, unmarried daughters were considered members and did not share the same rights to the ancestral property as the sons. Following their marriage, the daughters lost their status as members of the HUF as well.

In 2005, the Hindu Succession Act of 1956 was amended to include the rights of daughters as coparceners and legal heirs to any property that was passed down through the paternal line. This right is now considered inalienable and does not depend on her marital status.

Transfer and sale of ancestral property

As mentioned above, the coparceners of an ancestral property gain rights to the property at birth and not upon the death of the previous owner (as in the case of self-acquired property). This means the legal heirs hold complete rights over the property irrespective of the presence of a will or a transfer deed. Ancestral property cannot be willed away to anyone since subsequent generations have the right to ownership of the property.

For the sale of ancestral property, the agreement of all the legal heirs or coparceners is essential. The head of the HUF can maintain control of the property and manage and maintain the asset. When it comes to the sale of this property, written consent must be obtained from every heir and even if one coparcener objects, the sale can be stalled.

After division or partition, each legal heir receives an equal share of the ancestral property under Hindu law. Many families agree to sell the ancestral property as a whole, and the heirs receive an equal share of the sale proceeds. Any share of the property, sale proceeds, or any property bought from the share received by the heir is now treated like a self-acquired property.

Conclusion

If you are a legal heir or a coparcener in an ancestral property and have received a share of the sales proceeds, these can be reinvested in a flat or apartment in Mumbai or the suburbs. This newly bought property is now considered a self-acquired one. It is a good idea to consult a property expert or a financial advisor specialising in real estate investments to understand the tax implications.