It is common for a family member to open a joint account with another member. It has many benefits. The money deposited in the account can be used by both people who open a joint account. Many times the father-son has a joint account. It is difficult for tax when the money of the joint account is transferred to the son after the father’s death. The question is that if the money of the joint account has been transferred to the son after the father’s death, will it have to show it in income tax returns and he will have to pay tax? Moneycontrol interacted with tax expert Balwant Jain to know the answer to this question.
Tax rules on gifts
Jain said that in Section 56 (2) (x) of Income Tax Act, 1961, the rules of tax on gifts have been mentioned. According to this, if the value (cash or item) of the total gift found in a financial year is not more than Rs 50,000, then it will not come under the tax. This means that it will not be added to the income of the person who has received the gift. However, if the value of the total gifts is more than Rs 50,000, then it will be taxed. The person who has received gifts, its value will be added to his income.
No less tax than the value limit of gift
He said that it would have to be kept in mind that all gifts are included in the value of a value of Rs 50,000 for tax exemption. However, the will or inherited money is outside the scope of section 56 (2). This means that if a person has received money in a will or inherited, then he will not be taxed. The reason for this is that India does not have inheritance tax. Therefore, if the money of the joint account has been transferred to his son after the father’s death, then he will not be considered the income of the son.
No tax on inherited money
Jain said that in this case it is believed that the father has only one son, with whom the joint account was opened. If the father has more than one son or daughter and he did not make any will before his death, then the money of the joint account will be distributed among all sons and daughters. This money has been given to the father or sons or daughters from the father as a legacy, it will not be considered their income. Therefore, they do not have to show it in their income tax return.