Certain doubt with regard to amount received

. What is Inheritance Tax?

It is a given that one’s property and assets (including ancestral ones) get passed on to their legal heirs – children, grandchildren or wards – after he/she passes away. In many countries, the heir must pay Inheritance Tax for inheriting any such property or assets from your parents or grandparents or any other relative or friend.

In India, however, the concept of levying tax on inheritance does not exist now. In fact, the Inheritance or Estate Tax was abolished with effect from 1985.

2. Income tax implications on inheritance

In the event of death of an individual, properties belonging to the deceased would pass on to his legal heirs. This event, no doubt, is a transfer of an account without any consideration in return. Hence it could qualify as a gift for the purpose of income tax. However, provisions of Income tax Act, 1961, clearly exclude a case of transfer under a will or inheritance from the purview of gift tax. Accordingly, law does not provide for taxation of property received by way of inheritance.

3. Tax on income from inheritance

Many a time, the inherited property is a source of income – rent, interest etc. – to the owner. When the heir becomes the owner, the income goes to him. So, the new owner must declare this income and pay taxes accordingly.

Eg. Mr.Ram is the owner of a commercial complex that is given on rent. He had incurred a cost of Rs. 50 lakhs for the construction of the complex. He earns a monthly income of Rs.60000 from the complex as rent. Upon his death, the property is transferred from Ram to his legal heir (son) Shyam. Here, as the transfer is of the nature of transfer by will, it cannot be considered taxable. However the rent of Rs. 60,000 will be taxable in the hands of Shyam, as the income accrues to him.

4. Tax on subsequent sale

Once you inherit a property, you become the owner and you can choose to sell it subsequently.  This way, the capital gain or loss too will accrue to you as the legal heir.

Further, the holding period (period of yours and the deceased’s ownership) will determine if capital gains will come under long-term capital gains tax or short-term capital gains tax.

Eg. Mr.A, inherited the property from his father on his demise in the year 2017. Mr A’s father purchased the property for Rs.20,000 on February 2, 1997. It was sold for Rs.3,00,000 on October 2, 2018. Since the property has been held for a period of more than 24 months (holding period includes the holding period of the father too), the capital gain will be classified as long term. Accordingly, the legal heir can avail himself of indexation benefits while determining the capital gains.

Assuming that there are no capital gains implications (since the source is sale of parental property to which married daughters also have a right ) and if the same has been given as a gift,it should disclosed under exempt income schedule. Advisable to have a valid gift deed given the circumstances.

In my opinion, after the amendment made in Hindu succession act in 2005, daughters also have equal share in parents property or ancestral property. so the gain arouse from sale of ancestral property to be assessed proportionately in the hands of your mother. 2 lakhs might be given to her in lieu of relinquishment of her rights in the property and hence taxable. this is my views. let's wait for experts opinion

Capital Gain applies to the amount received. You will get indexation benefits.

As per my opinion.. We file Income tax return as per provisions of Income tax Act & not Hindu succession act.

So provisions of Only Income tax are applicable.

As per Income tax act  -

1) Any amount received from relative of Individual is exempt - Brother comes under relative

2)Any Amount received by will or Inheritance is exempt

Hence..as per my opinion there will not be any tax implication on amount reeived from sale of land.

However if you receive any interest from such Amount deposited - It will be taxable in your mother's hand 

Ms. pallavi, I would like to request you to comprehend the query clearly.
the sister receives 200000 from her brothers on account of sale of their ancestral property. as per Hindu succession act, the sister was also legal owner of ancestral property. so Any income derived out of ancestral property required to be taxed proportionately in the hands of sister and brothers.
my clarification to your post as follows
1. any amount received from blood brothers are exempt - I accept but the brothers paid that amount out of the sale consideration of their ancestral property. so being an legal owner, the sister received that amount as her share in the property (actually the sale consideration required to be taxed proportionately which may more than 2 lakhs)
2. any amount received by will is exempt - here the amounts not received on execution of will but on sale of ancestral property

correct me if I'm wrong

@ rama Krishnan...

Agreed ...you are correct.

Sale of Inherited property will be taxable & you can reduce cost of property to your parents at the time of arriving at gain. 

In this case ,If there are 2 siblings ..share should have been 50-50

Brother receives entire consideration of Rs. 10 Lakh & remitted only 2 lakhs from his wish ( Not because of her right ).

So to avoid tax payment..it would be better to give up right on property & receive Rs.200000 from brother as gift.

@ Pallavi P 

1.Had your mother signed the sale deed by which this property has been sold, or gave any power of attorney to her brother regarding this parental property.

2.If that is not so then the amount of Rs. 2 Lakhs received from your brother may be treated as gift

 

@ pallavi
I am not convinced
again in my opinion, the sum of money remitted by her brothers are immaterial. the amount to be considered is the capital gain computed in respect of the sold property and her percentage of share in that property. if her share is less than 2 lakhs for example 1 lakhs then that 1 lakhs has to be charged to capital gains and the balance 1 lakhs can be treated as gift. similarly, if her share more than 2 lakhs for example 3 lakhs then entire 3 lakhs has to be charged to capital gains.

as per Hindu succession act she's legitimate one of the owner of the inherited property and capital gains arouse as a result of transfer need to be taxed in hands of all co-owners proportionately.

again correct me if I'm wrong

@ Rama Krishnan

Suppose Property sold in 2019-20 ,  Entire Sale consideration is Rs. 10,00,000

Cost of acquisition to father is Rs. 400000

Property inherited in 2018-19

Indexed cost of acquisition = 400000 x 289 (19-20) / 280(18-19)

                                         =  412857 

( If you know year of purchase of property by father , You can take indexation of that year also instead of 18-19)

Total Capital gain = 1000000-412857 = 587143

Suppose Mothers share in land is 20 % ( 200000/1000000) ( Assuming she signed sale Deed)

Share in Capital Gain - Rs.1,17,429 ( 587143 *20% )

If your mother has no other income , Entire capital gain will be adjusted against basic exemption limit of Rs. 250000

Hence no Capital gain tax will be payable by her.

If she has not signed sale deed or given up right on property , still there will be no tax as entire amount received from brother on his wish will be treated as gift from brother.