INDIA Law and Practice Contributed by: Rishabh Shroff, Kunal Savani and Chirag Shah, Cyril Amarchand Mangaldas
in it during the owner’s lifetime. However, after the owner’s death, the legal heirs can claim a share in the property as per the applicable rules of succession. A person who owns self-acquired property has the right to dispose of it as per his or her wishes. The owner can sell, gift, or Will away the property to anyone he or she desires. Portuguese civil law as applicable in the state of Goa recognises the concept of community property where - in both spouses are considered joint owners of the property acquired during the marriage. The Uttarakhand UCC eliminates the distinction between ancestral and self-acquired property as out - lined in Hindu Law. The Uttarakhand UCC is silent on the coparcenary rights established by the Hindu Suc - cession Act, 1956. Consequently, the same scheme of succession will apply to both ancestral and self- acquired property for Hindus. Unlike other jurisdictions such as the USA and UK, India does not recognise the concepts of prenuptial and postnuptial agreements as legally tenable. The law considers such contracts against the public pol - icy of India and thereby void under Section 23 of the Indian Contract Act, 1872. However, this position can be qualified subject to the provisions of the person - al and customary law applicable to the parties, and courts may enforce a pre- or post-marital agreement. Recently, courts in India have been attributing limited persuasive value to such agreements, provided that the said agreements do not attempt to dictate future separation. Agreements which stick to aspects of asset classification, financial contribution and entitle - ment may be considered during separation/divorce proceedings on a case-by-case basis. 2.5 Transfer of Property See 1.3 Income Tax Planning . 2.6 Transfer of Assets: Vehicle and Planning Mechanisms There is no estate or inheritance tax in India. Further, property received under a gift, Will or inheritance is exempt from capital gains tax. Hence, any property whatsoever can be passed down the generations tax- free via a Will or even intestacy.
As per the anti-avoidance provisions, gifts made to third parties would not be tax exempt. However, such anti-avoidance provisions would not apply to relatives as discussed in 1.2 Exemptions . A gift is tax exempt - ed provided it is made to a person who qualifies as “relative” under the definition provided under Section 56 (2)(x) of the ITA. However, whilst the definition of “relative” is wide and covers most relationships, few relationships, like in the case of gifts from nephew to uncle, are not covered under its definition. Hence, a gift which is not covered under the purview of the definition could be taxed. Typically, Indian trust deeds also follow the worldwide approach by including certain charitable organisa - tions as an ultimate beneficiary in extreme remote scenarios. Addition of such charities was generally acceptable from an income tax perspective. However, pursuant to an order dated 30 December 2024 passed by the Indian income tax authorities in the matter of “Buckeye Trust”, the ability to add a charitable organi - sation/any beneficiary (who does not fall within the definition of “relative” as discussed above) has been inhibited. It was observed that if a trust deed which merely enables the trustees to induct beneficiaries who are not “relatives” under the ITA, then such trust cannot be regarded as having been established solely for the benefit of the “relatives”. Thus, the taxpayer trust cannot claim exemption from applicability of Section 56 (2)(x) of the IT Act. This ruling has since been recalled and the matter is to be reheard. The final decision will be crucial for all private trusts, as many Indian families may need to revisit their trust deeds to comply with the final outcome of this matter. Nomination is considered a widely used tool for seam - less transition of certain asset classes such as bank accounts, mutual funds and certain investments. While nominees are merely custodians, not necessar - ily the ultimate beneficiaries, it is advisable to align the named nominees with the intended legatees. Vide a circular dated 10 January 2025, the Securities Exchange Board of India (SEBI) has revamped the rules of nominations with an aim to ease the nomina- tion process in mutual fund folios and demat (demate - rialised) accounts. These revamped rules bring about various welcome simplifications such as reduction of
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