Income Tax--Gift

Issues in Inheriting Assets

V.K. Subramani

A person may receive some asset (whether cash or non-cash) without any consideration in return for such receipt. When such assets are received from parents there is no income-tax implication. Even receipt of asset(s) from relatives referred to in section 56(2)(x) is a tax-free transaction. However, if the transaction falls within the definition of 'transfer' then the transferor is covered by section 50C though the transferee is not subjected to tax under section 56(2)(x). Hence, the practical way out would be to gift the money and /or property between relatives instead of resorting to sale transaction.

One can visualise a situation where more than one legal heir succeeding to the estate of the deceased. If the succession is an intestate succession, then there is no specific share for the legal heirs who thus by default, would be eligible for equal share. If a legal heir relinquishes the right in the property by means of a gift settlement there is no tax implication on all the legal heirs. However, if there is consideration for relinquishing such right then the same relief would not follow. It would be regarded as 'transfer'.