I inherited ₹20 lakh in cash and two house properties. Subsequently, I gifted ₹10 lakh in cash and one house to my maternal aunt residing in South Africa. Do I need to pay income tax on the entire inheritance, or only on the remaining amount after allocating my aunt’s share? Additionally, should I declare this transfer in my income tax return (ITR)?
—Name withheld on request
In compliance with section 47 of the Income Tax Act, the transfer of capital assets through inheritance is exempt from taxation. Therefore, receiving ₹20 lakh and two house properties through inheritance does not trigger any tax liability presently. Any tax obligation will only arise upon the eventual sale of the house property in the future. It’s worth noting that the current income tax return does not include provisions for declaring inherited property, thus no further disclosure is necessary for these inherited assets.
As per Section 56 of the Income Tax Act, any monetary gift, immovable property, or movable property received by an individual becomes taxable if the total amount received during the year exceeds ₹50,000. However, there are specific exceptions to this rule, including gifts received from relatives.
For the purpose of the Income Tax Act, “relative” includes:
(a) Spouse of the individual;
(b) Brother or sister of the individual;
(c) Brother or sister of the spouse of the individual;
(d) Brother or sister of either of the parents of the individual;
(e) Any lineal ascendant or descendant of the individual;
(f) Any lineal ascendant or descendant of the spouse of the individual;
(g) Spouse of the persons referred to in (b) to (f).
Hence, the transfer of cash and house property to your maternal aunt is also expected to be non-taxable. However, the repatriation limits for the gift will be governed by the Foreign Exchange Management Act (FEMA) laws, permitting her to receive funds within the specified limits.
I am a working professional and the gross receipts from my profession amount to ₹12 lakh. Additionally, I have short-term capital gains from debt funds redemption. If I intend to avail benefits under Section 44ADA, which income tax return (ITR) form should I utilize for filing my taxes?
—Name withheld on request
Typically, when disclosing income under presumptive tax, it’s advisable to use income tax return (ITR) form 4. This form is designed to streamline the reporting process for income from business and profession, albeit it’s confined to declaring income solely from house property and other sources. However, if you have capital gains income, you’ll need to utilize ITR 3 instead. This particular form is tailored for taxpayers earning income from business and profession, necessitating the disclosure of capital gains in addition to other income.