Question: My father had a savings bank account, with me as the second holder. He passed away on April 23. Since I was the joint holder on the closure of my father’s bank account, the balance amount got transferred to me. Please tell me what will be my tax liability for such an amount and where I need to show the said amount in my income tax return for FY 2021-22?
Answer: Section 56(2) of the Income-tax Act, 1961 provides for the taxation of gifts received during the year if the aggregate value of all the gifts, whether in cash or in-kind during the year, exceeds Rs. 50,000. Anything received under a Will or as legal heirs under personal law, on the other hand, falls outside the scope of Section 56(2), and those who receive such inheritance are not taxed. Since there is no inheritance tax in India, the money received by you on the death of your father is fully tax-free in your hands without any limit.
Please note that the other legal heirs may ask you for their share of the money received by you if there are other legal heirs entitled to inherit from your father, provided he died without leaving a valid Will. However, if your father left you this sum in a valid Will, you are not obligated to other heirs.
Since the money received by you as a legal heir is not an income, you are not required to disclose the same in your income tax return. However, if you wish, you can disclose this under schedule EI of exempt income.
Question: I had invested in the bonds of a listed company with a cumulative option for interest that matured on March 15, 2022. I have not shown any interest income for these bonds in the past. Can the total interest amount received be included in my income for this year?
Answer: Taxpayers have the option to offer their income either on a receipt basis or on an accrual basis for income falling under the heads “Profits and Gains from Business or Profession” and “Income from Other Sources”.
Under the accrual basis, you have to offer the income for taxation as and when the right to receive it accrues to you, whereas under the cash basis, you can offer it for tax as and when it is actually received. Since you have not offered the interest income for tax on an accrual basis in the past, you will have to offer the entire interest income received for taxation during the year of receipt, i.e., the financial year 2021–2022. Though there is a provision under Section 89 for grant of relief in the event of salary for more than twelve months being received in one year, whether in advance or in arrears, there is no such similar provision for granting relief for income received in the nature of interest received for more than one year. So you will have to include the entire amount of interest in your income and pay tax at the slab rates applicable to you.
The author is a tax and investment expert.
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
