A stepson cannot inherit property from parents
Q: One of my relatives in India passed away. He had no heirs. However, his wife has a minor son from her previous marriage. The son’s income was added to the income of his stepfather for tax purposes. Can the stepson claim right of inheritance of the property of his stepfather?
A: Under section 2(57) of the General Clauses Act, the word ‘son’ includes an adopted son. However, a stepson is not included. In common parlance, a son must bear direct blood relationship with the parents. Therefore, courts have taken the view that a stepson does not inherit property either under the Indian Succession Act or the Hindu Succession Act.
This position applies where a person has died intestate, that is, without making a will. If the deceased has made a will and bequeathed a part or whole of the property to the stepson, then the latter would inherit the same. It may be noted that under section 2(15-B) of the Income-tax Act, 1961, a child is specifically given a wider definition to include a stepchild. Therefore, if such stepchild has any taxable income, it would be added to the income of either the stepfather or stepmother whose taxable income is higher, and taxed in such person’s hands under section 64 of this Act.
Q: Several shell companies have been registered in India and directors have been appointed on those companies who are not qualified and who are mere stooges of promoters who want to remain behind the scenes. Is anything being done to weed out such companies?
A: The Ministry of
Corporate Affairs is looking at this issue with great seriousness. It is proposed that all existing directors of companies in India will be required to file online the requisite form providing their digital signatures which are linked to their permanent account number (PAN) under the income-tax law. PAN authenticated digital signatures will help to establish the genuineness of the directors. Further, a certificate giving details of the aforesaid documents will have to be given by a chartered accountant or company secretary. Such certificate will be issued by them after due verification. The permanent account number with the digital signature will be matched with the database of the income-tax department.
Q: I am a tenant in an old building in Mumbai. The flat has been kept locked from the time I am in the Gulf. The building is to be pulled down under a redevelopment plan by a builder who has bought over the old building. The builder has asked all the tenants to vacate their flats for a period of four years and flats will be allotted in the new building after construction. During this four-year period, he will pay each tenant a certain amount of compensation every month. I want to know the tax implications as I do not have any taxable income in India at present.
A: The amount received from the developer as compensation for vacating your old property will be taxable as ‘income from other sources’ under section 56 of the Income-tax Act. The full amount will be taxable in your hands as you will have incurred no expenditure which could be claimed as a deduction. Since you are a non-resident, the developer while paying you the amount every month will have to deduct tax at source which you can claim as a set-off against the tax payable by you before you file your return every year.
Another implication which will arise is that the developer while paying you the amount will also be liable to pay the Goods & Services Tax. This has been held in a recent ruling of the Authority for Advance Rulings. Since the GST rate is 18 per cent, developers will factor this tax liability while determining the amount of compensation payable to each tenant. Tenants participating in the redevelopment scheme will have to register under the GST law and file returns every year.