Top News

Income Tax Update: Many taxpayers often face confusion about taxation on inherited money, especially when funds are transferred from a deceased parent’s joint bank account. A recent query raised by a taxpayer highlights a common concern—whether the amount received after the death of a parent is taxable under the Income Tax Act. Tax experts clarify the issue under existing tax laws and exemptions related to inheritance.

Updated: November 26, 2025
Source: Your Money Desk

The Situation

A taxpayer shared that he held a joint bank account with his father. After the father passed away in April, the balance from the account was transferred to him, and the joint account was subsequently closed. The question he asked: Is the received amount taxable?

To understand the applicable tax rules, Moneycontrol spoke with tax expert and Chartered Accountant Balwant Jain, who explained the legal position in detail.

Tax Rules on Money Received as Gifts

Balwant Jain explained that Section 56(2) of the Income Tax Act covers taxation on gifts. Under this section:

• If a person receives gifts (including cash gifts) exceeding ₹50,000 in a financial year, the entire value becomes taxable.

• However, there are important exemptions to this rule.

Inheritance Is Not Taxable

Jain clarified that money received through inheritance—whether through a registered Will or personal succession laws—is exempt from tax. Since India does not impose inheritance tax, any amount received due to the death of a parent is not considered taxable income.

Therefore, the funds transferred from a deceased parent’s account to the legal heir do not attract income tax.

What About Rights of Other Legal Heirs?

Jain added that the legal perspective matters when determining ownership:

• If the amount was transferred without a Will, other legal heirs (siblings, spouse, etc.) may claim their share, since the person receiving the money acts only as a trustee for all legal successors.

• If a valid Will assigns the funds solely to one heir, then the beneficiary has exclusive legal right to the money, and no sharing obligation exists.

• If the individual is the only legal heir, the entire amount belongs exclusively to them.

Is It Necessary to Report the Amount in Income Tax Return?

Since inherited funds are not income, reporting them in the Income Tax Return (ITR) is not mandatory.

However, taxpayers may choose to disclose the amount under the "Exempt Income (EI)" schedule in the ITR for transparency, especially in case of large deposits. This can be useful during future assessments or audits.

Key Takeaways

Expert View

Jain concluded that inheritance continues to be treated favourably under Indian tax laws, both for assets and for cash. Families settling financial matters after bereavement should ensure clarity regarding succession rights to avoid future disputes.

Final Words

If you receive money from a deceased parent’s joint account, you do not need to pay income tax on it as long as it qualifies as inheritance. However, ensure transparency with legal heirs and maintain documentation for future compliance.

Disclaimer

The views and guidance provided by tax experts are their personal professional opinions. Readers are advised to consult a certified tax advisor before making financial or legal decisions.