My father wants to gift me a plot of land, which is his self-acquired property and is valued at over Rs 1 crore. My sister has no objection. What would be the tax implication for me? Is it better to inherit the property via a will instead?
Amit Maheshwari, Partner, AKM Global:
It is pertinent to note that Section 56(2)(x) of the Income-tax Act, 1961, deals with the taxability of income in the nature of gift of movable or immovable property. It has been clearly mentioned that in case such a property is received by way of will or inheritance, or if received from any relative, it would not be subject to tax. Therefore, it will neither invite any capital gain, nor be considered ‘income from other sources’. Since your father falls within the definition of ‘relative’, there shall be no tax implication for you. If the property is inherited by way of will rather than as a gift, the taxability would be the same, that is, it will be exempt from tax under this provision. However, in case of a gift, it is advisable to have a registered gift deed.
My son-in-law passed away recently. My daughter, their two minor children, and his mother are class I legal heirs. His mother wants to transfer the following amounts that she has, or will, receive in her bank account, to my daughter: a) The balance in the bank account of the deceased, to be received by the mother, as she is a nominee. b) Her share of benefits, to be received from the employer of the deceased. The employer wants to pay the benefits to the four class I legal heirs separately. What will be their tax liability, if any?
Amit Maheshwari, Partner, AKM Global: The bank account balance of the deceased, which is to be received by his mother, would not be subject to any tax. The transfer of the same amount by the mother to your daughter would be treated as a gift by a relative, since your daughter and her mother-in-law are relatives. Hence, there won’t be any tax implication in the subsequent gift as well. Any lump-sum payment, be it gratuity or compensation, by the employer to legal heirs of the deceased employee during his active service, are fully exempt from tax in the hands of the legal heirs. Therefore, the transfer of her share of benefits by the mother of the deceased to her daughter-in-law would be treated as a gift from a relative. This would be exempt from tax by applicability of the above provision. The employer is bound to pay the benefits to the nominees appointed by the deceased employee in the requisite form. However, in the absence of nomination, the legal heirs will receive it. In either case, it is advisable to have the gift deed registered.
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