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Rediff.com  » Getahead » Will my inheritance be taxed?

Will my inheritance be taxed?

By Relax With Tax
July 05, 2005 08:43 IST
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You have a question about house rent allowance, medical allowance, or even a general tax query.

Here's where we step in with our experts, Relax With Tax.

Got a question for Relax With Tax? Please write to us 

Image pay Rs 5,000 every month to my wife as house rent. She owns the house and gives me a receipt. 

Can I get tax benefit though she is dependent on me? 

She is a PAN holder and files a return regularly.

 - Prem Chand

The husband and wife relationship is not one of a commercial nature. After all, a husband and wife are supposed to stay together.

Hence, payment of rent to wife may not be acceptable by the income tax authorities. This income tax department may view this as a sham transaction to avoid tax.

I bought a property in my name in Lucknow in 2000.

Now, I would like to sell it and buy  property in Mumbai jointly with my husband.

Will I be liable for capital gains tax?

- Nupur Agrawal

Yes. You will be liable to pay capital gains tax on the amount of capital gain arising due to the sale of your Lucknow property.

Assuming that this property was a residential property, you could avail of exemption from capital gains tax under Section 54 of the Income Tax Act, 1961.

The exemption is available on investments made in another residential property that has to be acquired/constructed within the specified time limits.

The amount of exemption that you get will be the least of the following:

1. The amount of capital gain generated on the transfer of the residential house property

2. The amount invested in purchasing/constructing new residential property.

Though the new property involves your husband as joint owner, you could put in the required amount to neutralise any tax liability that has arisen.

I inherited property from my mother which I sold this year for Rs 4,00,000. I also received Rs 2,00,000 on my father's passing away.

Am I be liable to pay tax on these amounts?

- Ponnan Manmohan

The tax due to inherited assets arises if income is generated by these assets or the assets are sold.

In your case, as you have sold the inherited property, the capital gains tax (if any) arising on such transfer would be liable to be paid by you.

The nature of your father's savings is not clear and hence the taxability of such asset cannot be specified here.

Assuming that it is in the nature of a bank balance, then any interest you earn on it will now be taxable in your hands.

Got a question for Relax With Tax? Please write to us!

Note: Questions may be edited for brevity. Due to the tremendous response, all queries will not be answered.

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Illustration: Dominic Xavier

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