How is the gifting of money or property to a relative taxed

The following article was first published in the Mint newspaper on 7th June, 2022. The same was written by our Private Client team at Cyril Amarchand Mangaldas, who frequently publish their comments and opinions in the Mint. The online version of the article can be found here.

I want to gift money to my elder brother. What will be the tax implications. Can I also gift immovable property to my brother?

— Name withheld on request

Gifts within relatives are exempted under section 56 of the Income Tax (I-T) Act 1961 . Further, a brother qualifies as a ‘relative’ under the I-T Act. Therefore, any gift by you to your brother would be exempt from taxation for your brother and yourself. As regards gifting of immovable property, the same will also be exempt from tax under the I-T Act. However, for the gift to be effective, the gift deed will have to be duly stamped and registered.

My father died intestate leaving behind some shares in physical format. These shares are in my possession. I want to share these assets equally with my sister, but she is not cooperating in getting this done. Under the circumstances, what is the solution for getting the assets transferred.

— Name withheld on request

In this case, assuming there is no other legal heir, as per section 51 of the Indian Succession Act 1925, you and your sister will be entitled to your father’s estate/property in equal proportion. Do note that legal ownership and entitlement is different from possession (physically or otherwise).

As regards getting the shares transferred, the manner of the non-cooperation of your sister is unclear. Also, your query seems to indicate that your father had not filed any nomination in relation to the shares. The process for transmission of the shares will be guided by the articles of association of the company and any nomination that may be in place, after complying with the requisite process.

Broadly speaking, that title to the shares will be complete once your position as a legal heir is crystallized. Appropriate proceedings for obtaining grant of letters of administration or a succession certificate may be filed before the relevant court, depending on the advice of your attorney. Such proceedings can be filed by you, however, the same will include issuance of notice to your sister, who also should be on board with this approach. If your sister does not object to the same, the grant can be issued in your name. Once the letters of administration/succession certificate is obtained, you can approach the company and get your entitlement (i.e., 50% shares) transferred in your name.