Is inherited money taxable in India after a parent’s death?

Gift Tax

When you receive money after a parent’s death, does it become taxable? That’s the question we address in today’s Ask Wallet Wise.

Moneycontrol’s Ask Wallet-wise initiative offers expert advice on matters related to personal finance and money-related queries. You can email your queries to askwalletwise@nw18.com and we will try and get a top financial expert to address your queries.

My father had a joint savings bank account in which I was the second joint holder. He passed away on April 23, 2024. Since I was a joint account holder, upon closure of my father’s account, the balance in his savings account was transferred to a new single account opened in my name in the same branch. Please let me know the tax liability on this amount and where it needs to be shown in my Income Tax Return (ITR) for the financial year 2024–25.

Expert advice: Section 56(2)(x) of the Income Tax Act, 1961, deals with taxation of gifts received during a year. It provides that if the aggregate value of all gifts (in cash or kind) received during a financial year does not exceed Rs 50,000, they are not treated as income of the recipient. However, once the aggregate value of such gifts from all sources during a year exceeds Rs 50,000, the entire value is treated as income and taxed—there is no basic exemption for the first  Rs 50,000.

It is important to note that this limit applies to the total gifts received from all sources, not just an individual gift. However, amounts received either under a Will or as inheritance are outside the scope of Section 56(2) and are not taxable. Since India does not have inheritance tax, the money you received after your father’s death will not be treated as income, regardless of the amount.

I assume you are the sole legal heir. If there are other legal heirs and your father passed away without leaving a valid Will, you may need to share the money with them. If your father left a Will naming specific beneficiaries, you are obliged to pass on the money to them.

If there are no other claimants and you have received the amount purely as a legal heir, it is not considered income and therefore does not need to be disclosed in the ITR for the year.

Balwant Jain is a Mumbai based tax expert.

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