INDIA Law and Practice Contributed by: Rishabh Shroff, Kunal Savani and Chirag Shah, Cyril Amarchand Mangaldas
2.4 Marital Property In India, any property which is self-acquired does not become a jointly owned property by virtue of mar - riage as India does not follow the principle of com - munal ownership of property. Only ancestral property is treated differently. The spouse who owns the self-acquired property can transfer such self-acquired property without the con - sent of the other spouse. Self-acquired property is protected under Hindu Law, and even the Class I legal heirs of a person (including his or her spouse) who have acquired such property cannot claim a share 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 and Gujarat UCC eliminate the dis - tinction between ancestral and self-acquired property as outlined in Hindu Law. The Uttarakhand and Gujarat UCC are silent on the coparcenary rights established by the Hindu Succession 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 92 (5)(g) 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. However, pursuant to an order dated 30 December 2024 in the matter of “Buckeye Trust”, the ability to add a charitable organisation/any beneficiary (who does not fall within the definition of “relative”) has been inhibited, as the trust cannot be regarded as having been established solely for the benefit of “rela - tives” under Section 92 (5)(g) of the ITA. 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. 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.
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