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Income from will

Sanjay Kalra (Tax Consultant) (57 Points)

15 September 2015

My cousin who was 42 years old and was unmarried died 15 days back. Before his death he executed a will in favour of her Girl Friend, who is also a kind lady. My cousin had two Bank accounts wherein around 10 Lacs is the balance and he also had an immoveable property which is a Flat and present value of the said Flat is around 1 Crore.

Now his Girl Friend is the sole beneficiary of the WILL and the property / bank balance. I wish to ask if there is a Income Tax liability on her in case she sells the said flat immediately and realises the sale proceeds within 2-3 months i.e. in this financial year 2015-16, and if there is any Income Tax Liability would it be treated as Income OR Gift by the assessing officer.

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3 Replies

S. Shiroor (Others) (1207 Points)
Replied 15 September 2015

1) If she sells the flat it will come under LTCG. becoz Date of acquisition by donor is the date of gift receiver/Inheritor. So the date of acquisition of flat by cousin is relevant. If it is more than 3 years it will be LTCG otherwise STCG

2) Cost of acquisition of donor (your Cousin) is the cost of acquisition for donne ( gift recipient ) /Inheritor

3) Indexation from the date of acquisition by the donor(ur Cousin) shall be taken.

4) Adopt market value as cost if the asset was acquired by ur cousin before 01/04/1981 It has been provided in clause (i) of section 55(2)of the I T Act that in case the capital asset was acquired before 01/04/1981 , the market value as on 01/054/1981 can be adopted as cost of acquisition .

5) Claim exemption u/s 54 or 54EC as the case may be . She can buy another house and claim exemption u/s 54 or invest the gains part in LTCG bonds and claim exemption u/s 54EC . Under 54EC only 50lks can be exempted - rest of it will taxed.

You should approach a good CA /Tax Consultant/lawyer cum Tax consultant in ur area and take his help for filing tax returns so that the tax burden will be minimum.

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Sanjay Kalra (Tax Consultant) (57 Points)
Replied 27 October 2015

Thank you so much __/\__

Miss Rinkal (Student) (1309 Points)
Replied 27 October 2015

The consideration recd by girlfriend under a will, there will not be any tax liability as this kind of transaction is specifically excluded from sec 56(2)(vii).

However on sale of flat or income derived from investing the bank balance into FD or so and interest earned on it would be subjected to tax. Also if the said flat is sold, the consideration recd would be subjected to cg tax. The cost of acquisition of the flat would be the cost of acquisition of his boyfriend which us subjected to indexation (if the said asset was purchased by his boyfriend beyond 3 years)

Not only this, she can avail several exemption from capital gains subject to fulfillment of certain conditions