Earlier this week, the Supreme Court passed a judgment on equal inheritance that cleared the ambiguity around a daughter’s right to property under the Hindu Succession Act.

Justice Arun Mishra, heading the three-judge bench said, “A daughter always remains a loving daughter. A son is a son until he gets a wife. A daughter is a daughter throughout her life.”

If that statement made you scoff, stay with me. If it didn’t, stay with me anyway.

In the year 2005, the Hindu Succession (Amendment) Act replaced the five decade old Hindu Succession Act of 1956. Under the old Act, only an unmarried daughter had a right to ancestral property. The new Act eliminated this discrimination.

While the 2005 amendment was a revolutionary step to uphold the fundamental right of equality guaranteed by the Constitution of India, some ambiguity around the interpretation of the law still remained. 

What was this ambiguity?

Right after the amendment, multiple cases sprung up across various states. Different benches of the Supreme Court and High Courts issued contradicting verdicts. The two areas of conflict were:

  • If the father hadn’t been alive when the amended Act came into effect on September 9, 2005, could the daughter still claim equal inheritance?
  • Would this law apply to daughters born before September 9, 2005?

To iron out these confusions, the Supreme Court, on Tuesday, ruled that daughters will, by birth, have inheritance rights equal to those of sons, irrespective of whether the father was alive or not when the amendment was made fifteen years ago. And it would also include daughters born before the 2005 enactment. However, the cut-off date to claim rights to ancestral property already sold is set at December 20, 2004. 

Now I’ll leave the legalities to the lawyers, but what I want to talk about here are two aspects of personal finance that come up during discussions around inheritance. One of these aspects is sometimes difficult to grasp, and the other we often entirely overlook.

1. How is inheritance taxed under the Income Tax Act?

Under tax laws, inherited property and purchased property are treated differently. With inherited property, three events become significant – the year the property was originally acquired or built, the year in which this property was inherited, and the year in which the property was sold (if at all).

Only the last event – sale of property – attracts income tax. This is nothing but capital gains tax and one can reduce the tax amount by investing the sale proceeds in either buying or constructing another property, and/or investing the funds in bonds of NHAI (National Highways Authority of India) and REC (Rural Electrification Corporation).

Capital Gains Tax
Tax on sale of inheritance property is called Capital Gains Tax

Chartered Accountants and Financial Advisors are the best people to help calculate this tax amount.

2. Does Hindu law override Nominations and Wills? 

Firstly, let’s look at the difference between a Nomination and a Will.

Nomination is only a right to receive and hold the assets or funds of the deceased person. Whereas a Will is the right to own the assets or funds.

The Hindu Succession Act supersedes nomination. And a Will supersedes the Act. Which means that a Will trumps all, (barring a few exceptions we’ll go over in a post dedicated to Wills). Disputes and litigation only arise in the absence of a Will.

You might wonder then, “What’s the point of nomination? Why not just have a Will?”

Both are equally important.

Now, let’s take a hypothetical situation. Say, Amitabh Bachhan has a mutual fund and he names his son, Abhishek, as the nominee. However, in his Will, Bachhan Senior has expressed his desire to pass on all his wealth to his wife, Jaya. In the event of his death, the mutual fund house will transfer the entire investment to Abhishek’s bank account. But this is temporary. The executor of the Will will eventually pass on the amount to Jaya, since the Will trumps the nomination.

What’s interesting here is that in the absence of a Will, Jaya, Abhishek and his sister, Shweta, have a right in the mutual fund.

So while nomination ensures smooth and hassle-free transfer of funds, a Will ensures distribution of wealth in accordance with the deceased family member’s wishes.

Make a Will
Make a will and ensure all your nominations are in place.

It is only when there is no Will that the Law intervenes.

Bollywood movies aren’t the only place where we see drama around property disputes. Ideally, not only Amitabh, but Abhishek and Shweta should also have their Wills in place. All it needs is putting down your assets and liabilities on plain paper and getting a witness to attest to it. A Will can evolve over time, but it’s essential to have one. You’d save your family a whole lot of trouble they might go through without it.

On the personal finance front, taxation is slightly less worrisome than having to go through legal battles because somebody didn’t make their Will.

The Big Picture

Looking at the larger picture, as the country discusses the merits of this equal inheritance clarification that the Supreme Court has issued, there are other matters that we need to bring to the fore as well.

States like UP, Punjab and Haryana are still riddled with patriarchal biases and a host of gender battles. Citing a recent statistic, 73.2% of rural women workers are farmers against 55% rural men, yet these women own just 12.8% of agricultural holdings. On the other hand, progressive states like Kerala have abolished the Hindu Joint Family System altogether, way back in 1975.

So, while Justice Arun Mishra can write poems about sons and daughters, true equality comes from believing in equality first.

Kargil girl, Gunjan Saxena, who was the first woman Indian Air Force officer to go to war, puts it beautifully, “The machine will not know whether a man is flying it or a woman is flying it.”

On that note, Team Rupiko wishes you a Happy Independence Day weekend ahead!

Author Bio - Komal Shivdasani

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