Money that arrives through inheritance often carries as many questions as it does value, and it was precisely these questions that Ashutosh Financial Services set out to address through its webinar on Tax Planning of Assets Received by Succession. Educational sessions of this kind reflect a belief the firm holds closely: that sound financial decisions are only possible when people first understand the rules that govern their money. For high net-worth individuals in particular, who often deal with layered family assets, ancestral property, and cross-generational wealth transfer, this understanding becomes essential rather than optional.
The session was conducted in December 2022 as a webinar for an audience of High Net-worth Individuals, with Daxesh Kothari as the speaker. Given how frequently succession-related wealth changes hands within this audience segment, the topics covered were directly relevant to the kind of planning many of them either face today or will encounter in the years ahead.
The discussion opened with the taxability of assets received through succession, anchored in Section 56(x) of the Income Tax Act. Under this provision, any sum of money exceeding Rs. 50,000 received without consideration, or any property received without adequate consideration beyond that threshold, is ordinarily treated as taxable income. However, the law carves out clear exceptions. Assets received from a relative, on the occasion of one’s marriage, or through a will or inheritance remain exempt from this taxation. This distinction matters because it clarifies that succession-based transfers, whether through a will or by way of legal inheritance, do not attract income tax in the hands of the recipient, regardless of the value involved. Section 56(x) itself places no upper limit on how much can be received this way.
That absence of a monetary ceiling, though, does not mean the matter ends there. The session moved on to Section 68 of the Income Tax Act, which deals with unexplained cash credits. If a sum is credited in an assessee’s books and no satisfactory explanation is provided about its nature and source, the assessing officer can treat that sum as taxable income for that year. The tax consequences here are steep: income taxed under Section 68 attracts a rate of 60% plus a 25% surcharge, taking the effective rate to 77.25% if disclosed voluntarily in the return. If the amount is instead added during assessment, an additional 10% penalty under Section 271AAC pushes this to 83.25%, and in cases involving misreporting of income, a further 200% penalty under Section 270A(8) can apply. To avoid falling foul of Section 68, three things need to be demonstrable: the identity of the person from whom the credit was received, that person’s creditworthiness, and the genuineness of the transaction itself. Even something as commonly inherited as gold jewellery has defined limits that are treated as explained under CBDT circulars relating to search and seizure — 500 grams for a married woman, 250 grams for an unmarried woman, and 100 grams for a male family member — provided it has been appropriately disclosed.
An interesting question the session addressed was whether it is preferable to receive property as a gift during a relative’s lifetime or to receive it later through a will. Both routes are equally exempt from income tax under Section 56(x), so the deciding factor often comes down to whether the will itself is likely to be contested. Related to this, the session explored how a discretionary family trust can be created as part of a will, allowing beneficiaries and their shares to remain undetermined at the outset while still being taxed as a separate entity at regular slab rates, complete with access to deductions such as Section 80C, rather than at the flat maximum marginal rate that would otherwise apply to a discretionary trust. Such trusts can prove useful where dependents need to be looked after with some flexibility built in.
Nomination and joint holding were also discussed at length, with an important clarification: a nominee is a custodian of assets, not their legal owner. Ownership is determined by succession law, whether under a will or through intestate succession. Financial assets can be jointly held on an “Either or Survivor” basis, but immovable property cannot, meaning that on the death of a co-owner, the property must still go through a formal transfer process. The session closed with a detailed look at Hindu Undivided Families, covering how they are formed, how ancestral versus self-acquired assets are treated, how coparcenary rights extend to daughters married before 2005 under the 2015 Supreme Court ruling, and how HUF income, gifts, and partition are each treated distinctly under tax law.
Succession planning is rarely just about legal paperwork; it is about understanding, well in advance, how decisions made today will be treated tomorrow. Sessions like this one continue to be part of how Ashutosh Financial Services approaches financial literacy — not as a one-time exercise, but as an ongoing effort to help individuals and families plan their financial affairs with clarity and foresight.
