I have inherited Rs.75 lakh in cash from my father after his death. How will this amount be taxed? As of now I have put this amount in my savings account.
Under section 56 of the Income-tax Act, any money received by an individual from a person during any fiscal year (FY) without consideration, the aggregate value of which exceeds Rs.50,000, is taxable under the head “income from other sources”.
However, an exemption could be availed if the money is received from a relative, which includes among others, any lineal ascendant or descendant of the individual. Accordingly, the money received by you from your father shall not be taxable.
You may consult a lawyer for the documentation with respect to the transaction.
Any interest earned on the money placed in the bank account shall be taxable in your hands as per the income-tax slab rate in which you fall. You could claim a deduction for interest on bank savings up to Rs.10,000 from FY13.
Is there a Rs.50 lakh ceiling for exemption on long-term capital gains (LTCG) from property sale?
The Act per se does not provide any restrictions on the quantum of exemption that could be claimed in respect of LTCG resulting from sale of a property.
The exemption from LTCG tax depends upon the quantum of LTCG reinvested in another residential property and/or specified bonds as per the provisions of section 54 and section 54EC of the Act, respectively. The limit specified in the sections are outlined below:
Section 54: In case of investment in a residential house, the exemption is restricted to the LTCG or cost of the new house, whichever is lower.
Section 54EC: The LTCG exemption is restricted to LTCG where investment in bonds is more. Where the investment in bonds is less than the LTCG, the exemption shall be calculated as a proportion of the cost of the new asset and the LTCG. However, the maximum investment in specified bonds is of Rs.50 lakh during an FY.
Please note that there have been litigations with the income-tax department on the subject such as whether the limit of investment into these specified bonds can be considered for two separate FYs.
Separately, while claiming the LTCG exemption, you should ensure the applicable time frames for reinvestment, restriction on transferability of new property or redemption of the specified bonds, as per the provisions of the Act, are met to ensure that the exemption is not revoked in future.
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