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A nominee is obligated to hand over the assets to the legal heir

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My father passed away at the age of 79 in February. In his will, he has mentioned 50:50 share to both the sons. My mother passed away seven years ago. These are the queries…

1. In a few bank accounts, I’m the nominee; in others, my brother is the nominee. How should we divide the money so that no tax obligation arises?

2. He had equity investments, which have been transferred on a 50:50 basis to our accounts. When can we sell them to avoid tax obligations?

3. He had MF investments in which I’m the only nominee. So, do I need to get them transferred to my account and sell them to give my brother a share as here also we are supposed to share 50:50? How should this be done to avoid tax obligations?

4. He could not file his I-T return for AY2021. Do we need to file it mandatorily? If so, what are the obligations and how can we inform the I-T department about his demise?

—Anil Jhamb

The nominee is a mere custodian who is obligated to hand over the asset/money to the actual legal heir. Therefore, the money from such bank accounts will have to be distributed in accordance with the will, irrespective of who the nominee is. However, if the accounts were not specifically dealt with under the will, they would be subject to intestacy, which would imply that you and your brother will each receive an equal share.

There is no inheritance tax in India. Money received in excess of 50,000 without any consideration would be subject to tax in the hands of the recipient at applicable rates.

However, such provisions are not applicable where money is received pursuant to a will. Thus, there should not be any tax in your or your brother’s hand.

The sale of equity shares may give rise to capital gains tax. It may be levied at rates ranging from 10% to 20% (plus applicable surcharge and cess) where shares have been held for more than 24 months (12 months in case of listed shares). Otherwise, such gains would be subject to tax at the rate of 30% (plus applicable surcharge and cess) (15% in case of on-market sale of listed shares). For the purpose of computing capital gains, the cost of acquisition in the hands of your father would be deemed to be the cost of acquisition in your hands and the period of holding of the shares would be determined from the date when such shares were acquired by your father.

The heir and the nominee should be the same as a matter of careful planning. The same principles set out in our response to the bank accounts would apply to the MF units. Since the MF units would be received according to your father’s will, there should not be any tax implications. If they are subsequently sold and cash is transferred, there may be capital gains tax implications.

You and your brother can file the tax return on behalf of your father. However, the last date for filing the tax return has already lapsed and it would be advisable that you contact your tax adviser or a chartered accountant in this regard.

Rishabh Shroff is partner, Cyril Amarchand Mangaldas.

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