My mother died and had fixed deposits. We are a sister and a sister as his legal heirs. All the FDs were in my mother’s name and I am the candidate. My mother didn’t make a will. I wish to transfer the FD to my sister for the education of her child. I checked with the banks, where these FDs are reserved and they said, we can only close these FDs and transfer the money to my account, as I am the agent. I can then transfer the money to my sister, if I wish.
My questions are:-
1) Will I get a notice or have to pay a fee once these are credited to my account?
2) How would my sister show this for ITR purposes, once I transferred these FD to her account after the amount was credited to my account.
My mother was a taxpayer and so was I. My sister is a housewife and does not file an RTI. However, she holds a PAN card and will now deposit an ITR, as she will reinvest those FDs and earn interest income.
The role of an attorney is that of a trustee of the legal heirs of the deceased and not that of owner of the property received as an attorney. Yes, the banks are correct that the money can only be credited to your bank account as you are the agent and by crediting the money to your account the banks are released from liability. Since you and your sister are both legal and proper heirs, you are both entitled to an equal share in your late mother’s estate. However, the legal heirs among themselves may agree on an unequal share or even agree on a single heir to obtain all the property to the exclusion of the other legal heirs.
So you can either let your sister inherit all of the money, or you can split it equally between the two of you first and then gift your share of the bank deposits to your sister. Since there is no inheritance tax in India, the inheritance received by both of you should not be treated as your income. If you give your share of bank deposits to your sister, this will also not be treated as her income, since gifts received from a specified relative, including siblings, should not be treated as income.
Whether you leave your sister the entire proceeds of fixed bank deposits as an inheritance or give half of the share as an inheritance and the other half as a gift from you, both transactions will have no no tax implications for you or your sister. .
Since inheritance as well as gifts from specified relatives are not treated as income, your sister is not required to disclose it in her ITR. If she wants, she can still show the money in Schedule EI (exempt income) of the ITR.
Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on Twitter