Nominee mere custodian, bound to transfer property to legal heirs

SC Vasudeva

Q.   Please advise me on the following points:

I am a senior citizen and have a joint FD account in a bank with my wife (2nd holder).  I have also made a nomination in favour of my daughter.  Kindly clarify:

a)   In case of my death, my wife (2nd joint holder) would be the sole claimant of the amount or other legal heirs can also claim their share in the amount.

b)   In case of death of both the account holders, the nominee would be the only claimant of the amount or other legal heirs can also claim their share in the amount.

c)   Also advise how the 2nd joint holder or nominee can be the only claimant for the amount without the claim of other legal heirs in above two situations?

How the interest income on the FDs would be treated.

- Narinder Kumar

A. Your queries are replied hereunder:

a)   In case of your death, your wife would be the holder of account and she will be able to operate the said account. However, in accordance with the provisions of the Hindu Succession Act, 1956, she would be accountable to the legal heir(s) in respect of the amount which stood deposited at the time of your death meaning thereby that such an amount would be considered as part of your estate which would be divisible among all the legal heirs in accordance with the provisions of the aforesaid Act.

b)   In case of death of both the account holders, the nominee would be entitled to receive the amount which stood deposited in the bank account as on the date of death of both the account holders. However, he/she will also be accountable to the legal heirs for the amount which stood deposited as on the date of death of both the account holders.

c)   In case you desire that your wife or the nominee should become the persons entitled to the amount standing in your bank account, it would be advisable for you to make a Will specifying the manner in which the fixed deposit and any other property, if any, will be inherited by your legal heirs so that no complications arise after your death.

Q.   I am a super senior citizen of 84 years. My wife is also above 80 years.  We hold a joint bank account.  I have been allotted a 100 sq yd plot under land pooling scheme by GMADA, Mohali, against my land which was acquired by the GMADA in 2011. Now I want to sell the plot (letter of intent issued in 2013) and gift the sale amount to my wife from our joint account. Will this gift amount be liable to income tax to me? Or income tax on interest after close of the financial year will be borne by my wife, who is a housewife and does not file income tax return. Please advise.

- Mohinder Singh

A. Section 64 of the Income-tax Act, 1961 (The Act) provides that in computing the total income of an assessee, there shall be included all such income as arising directly or indirectly to such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart.  According to the facts given in the query, transfer of any gift of an amount out of the sale consideration accruing on the sale of the plot of land to your wife would attract the above provision of the Act and therefore any income accruing to your wife from the amount so gifted shall be included in your taxable income.

Q.   Thanks for your valuable reply published in these columns on 12.8.2019. If I gift Rs 5 lakh to my cousin after paying long-term capital gain tax on proceeds from selling my property, will he be liable to pay tax on Rs 4,50,000 (considering Rs 50,000 as gift) on lump sum amount or the tax will be calculated on the amount so received as interest from the bank on the deposit of Rs 4,50,000.

- SVS

A. According to the provisions of Section 56 of the Act, your cousin would be liable to pay tax on the entire amount of Rs 5 lakh received from you. The provisions of the aforesaid section do not provide that only the interest on the gifted amount would be chargeable to tax.