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Mercy (N/A)     14 September 2012

Tax Angle - Fixed deposit transfer issue after someones death

 

Dear All,

 

After the death of my father in may 2012 the Fixed Deposits of my father were transferred on my mother’s name.

 

Now my mother wanted to transfer those FD of 5 Lac on my name by premature closing the Fixed Deposit and then giving me cheque to make similar Fixed Deposit on my name.

 

 

Now I have few questions related to Tax …..

 

1.      Since my mother got money from my fathers FD any TAX liability to my mother ? .i.e. Income TAX or Capital Gain Tax or any other Tax. . (money in question is NOT my mother’s self earned money, it’s my fathers money she got after his death)

 

2.      Now since she is planning to give me all that amount, am I supposed to pay ANY type of TAX, if I receive that 5 Lac by cheque from my mother for making FD on MY NAME. (money in question is NOT my mother’s self earned money, it’s my fathers money she got after his death)

 

3.    Pl. guide me what will be a good option. Taking 5 Lac from my mother through cheque. Or taking 5 Lac through cheque WITH a gift deed of 5 Lac rupee. (Am I or my mother supposed to pay any GIFT TAX, if the money is taken using cheque with GIFT DEED)

 

4.     Is there any Limit that my mother can’t give me more than --- Lac of rupee.

 

5.    If I am not wrong, the interest earned by me from those 5 Lac. FD will be added into my taxable income. (pl. correct me if I am wrong)

 

I will appreciate if Mr. R. Rajagopalan or someone else please answer me with a cut-paste of required section/law under which my answers stand firm.

 

thanks



Learning

 7 Replies

stanley (Freedom)     14 September 2012

Take for instance that the interest earned by you is at the rate of 10 % which would amount to Rs 50,000. Sa any  interest earned by you above 10,000 is taxable from these fixed deposits would be deducted at the rate of 10.3 % from the interest as TDS (Tax deduction at source)  . 

R RAJAGOPALAN (ADVOCATE)     14 September 2012

 

1.      Since my mother got money from my fathers FD any TAX liability to my mother ? .i.e. Income TAX or Capital Gain Tax or any other Tax. . (money in question is NOT my mother’s self earned money, it’s my fathers money she got after his death)

 

As your mother got the FD by inheritance on the death of her husband, she has no tax liability on the FD amount.

2.      Now since she is planning to give me all that amount, am I supposed to pay ANY type of TAX, if I receive that 5 Lac by cheque from my mother for making FD on MY NAME. (money in question is NOT my mother’s self earned money, it’s my fathers money she got after his death)

As you are getting the 'gift' from a lineal ascendant of yours, you do not have any tax liability on th FD amount.

 

3.    Pl. guide me what will be a good option. Taking 5 Lac from my mother through cheque. Or taking 5 Lac through cheque WITH a gift deed of 5 Lac rupee. (Am I or my mother supposed to pay any GIFT TAX, if the money is taken using cheque with GIFT DEED)

As the gift is of a movable property, no registered gift deed is required. However you may take a letter from her. There is no Gift tax liability. However the transaction may be done otherwise than in cash, by crossed cheque, or by transfer in the Bank's records.

 

4.     Is there any Limit that my mother can’t give me more than --- Lac of rupee.

There is no such limit.

 

5.    If I am not wrong, the interest earned by me from those 5 Lac. FD will be added into my taxable income. (pl. correct me if I am wrong)

The interest earned on the FD will be taxable in the hands of the recipient

Mercy (N/A)     14 September 2012

Hi Rajagopalan Sir,

First of all let me thank you for a quick and to the point answer to my question.

I am still not clear with few things like ...

 

a. When this 5 Lac will be added into my assets will it be clubbed or added into my total income for this finantial year i.e. say 3.5 Lac. (my this year income) + 5 Lac. (the gift I am talking about from my mother) = 8.5 Lac.  
Am I supposed to pay Income Tax on 8.5 Lac. or 3.5 Lac. + interest on FD of 5 Lac.

 

b.  In reply to point 3 you said "no registered gift deed is required". Sir will it be BETTER if I go for a registered Gift Deed. I don't want to be in problem of any kind in future.

 

c. Also are there any BIG charges or Tax or Stamp Duty etc. if I decide to go for a Registered GIFT DEED. (other then nominal paper making charges or nominal registration office charges).

 

d. In reply to point 3 you also said that I may take a letter from my mother (saying she is gifting me 5 Lac.) Now will it be on a plain paper or Rs 10 stamp paper (notarised) and what to do first take the letter or Registered Gift Deed first and then the cheque. Means can I take the letter/Gift Deed and cheque on the same date.

 

R RAJAGOPALAN (ADVOCATE)     14 September 2012

 

a. When this 5 Lac will be added into my assets will it be clubbed or added into my total income for this finantial year i.e. say 3.5 Lac. (my this year income) + 5 Lac. (the gift I am talking about from my mother) = 8.5 Lac.   
Am I supposed to pay Income Tax on 8.5 Lac. or 3.5 Lac. + interest on FD of 5 Lac.

Ans:You will pay tax on 3.5 Lac. + interest on FD of 5 Lac; ie; the gift-amount is tax -free.

 

b.  In reply to point 3 you said "no registered gift deed is required". Sir will it beBETTER if I go for a registered Gift Deed. I don't want to be in problem of any kind in future.

Ans: It depends on the nature of the problems you are afraid of; normally there is no need for any registered gift deed for the gift of a movable property.

 

c. Also are there any BIG charges or Tax or Stamp Duty etc. if I decide to go for aRegistered GIFT DEED. (other then nominal paper making charges or nominal registration office charges).

Ans: I cannot advise you on the amount of stamp duty, as it varies from State to State.

 

d. In reply to point 3 you also said that I may take a letter from my mother (saying she is gifting me 5 Lac.) Now will it be on a plain paper or Rs 10 stamp paper (notarised) and what to do first take the letter or Registered Gift Deed first and then the cheque.Means can I take the letter/Gift Deed and cheque on the same date.

Ans: Normally no document at all is necessary for the gift of a movable property.. However if you apprehend any challenge, you may get a Notarized affidavit from your mother along with the cheque.

Mercy (N/A)     15 September 2012

I want to thank Mr. R Rajagopalan once again for answering to my queries so clearly and to the point.

Mercy (N/A)     09 October 2012

Hi Rajagopalan sir,

 

Now I am in a small problem. Actually my mother's Fixed Deposit (the amount of which she is planning to gift me through cross cheque) is for 25 months and if she will premature cancel it, she will suffer a huge loss in term of interest earned. But she can premature close those Fixed Deposits in April 2013 with only slight interest loss.

 

Now my question is ....

 

1) HOW CAN she still gift me that amount "NOW" using "Gift Deed" no matter the Fixed Deposit will remain in her name till April 2013 and she will be able to give me the cheque only AFTER APRIL 2013.

 

2) or can she give me a post dated cheque and I can make a gift deed "NOW" on the basis of that POST DATED CHEQUE.

 

3) Can someone (here my mother) gift  "FIXED DEPOSIT PAPERs or CERTIFICATEs" and make a GIFT DEED on the basis of that by REFERING the Fixed Deposit numbers. No matter the FDs will remain on her name for few more months.

 

4) Or any other solution to this problem. Because if she will premature close the Fixed Deposit now she will only get 6% interest.

 

thanks

R RAJAGOPALAN (ADVOCATE)     12 October 2012

 

1) HOW CAN she still gift me that amount "NOW" using "Gift Deed" no matter the Fixed Deposit will remain in her name till April 2013 and she will be able to give me the cheque only AFTER APRIL 2013.

 

2) or can she give me a post dated cheque and I can make a gift deed "NOW" on the basis of that POST DATED CHEQUE.

 

3) Can someone (here my mother) gift  "FIXED DEPOSIT PAPERs or CERTIFICATEs" and make a GIFT DEED on the basis of that by REFERING the Fixed Deposit numbers. No matter the FDs will remain on her name for few more months.

 

4) Or any other solution to this problem. Because if she will premature close the Fixed Deposit now she will only get 6% interest.

Reply: These queries have nothing to do with income tax, but only with banking practices. You may try to sort out these  issues, with the Manager of the Bank.


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