Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Money back from father

nirav (Others) (50 Points)

06 September 2015

If a son has given (gifted / given loan) Fixed Deposits to his retired/non earning father so that his needs can be fulfilled from interest money and unfortunately father dies –

Case 1 – there is no will

Case 2 – If there is a ‘will’ but if it does not mention about recovery of that Fixed Deposits given by son

In both the above cases, how that son can recover money from father’s assets before equal distribution of father’s assets takes place among siblings?

Also, is there a kind of agreement required between father & son prior to giving money so that based on which son can recover that FD money & does that agreement required to be registered?

Further, should that money be shown as borrowed by father so that son can recover it easily and will there be any tax implications in entire issue?

Reply
Follow
Share

4 Replies

Udgam Koomar (Tax Technologist) (1949 Points)
Replied 06 September 2015

Im not an expert but this is what I think. Between son-dad gifting is allowed but its better to document it as later it comes of use, as in this case. Well, if the funds transfer to his account happened thru your bank, not cash deposit, you have some proof. If there was a gift deed or a personal loan deed stating after so and so period or event, this amount will go back to the source with ot without any TnC it woud have been very easy.

Miss Rinkal (Student) (1304 Points)
Replied 07 September 2015

I agree with Kaardaata to a certain extent. However i dont agree with gift deed conditions that so and so amt will be going back to the source after so and so period. Because the rights over a particular gift gets exhausted after donor gifts it to the done. Fundamental principle of a gift deed or gift.

However with personal loan deed, it can happen mentioning the T N C.

There are pros and cons in both the cases. I.e. in gift and loan deed

In gifting, son cannot recover the money from father's asset before distributing equally amongst siblings. However if there is a mutual understanding amongst siblings, this issue can work well. Bcoz, if son gifted to father, no tax implications because it is within the definition of relative. And on father's death, further no tax implications as amt is recd by way of inheritance which is outside the ambit of 56(2)(vii).

In case of loan deed, the amt can be recovered before distribution of assets. But in such case clubbing of income wrt interest on FD will arise every year which should have been taken in your it return. In case of loan returning there will be no tax implication on FD but with interest amt , i mentioned it above.

The cases that you have mentioned would be 1 and the same I.e For a will with no details of recovery is similar to having no will for the given case. With only a slight difference with respect to distribution of assets. In case of no will, 1 can convince their brother/sister but in case of will, that won't be possible becoz in a will the assets are already distributed. Hence no question of convincing.

Hope I am able to solve your problem

nirav (Others) (50 Points)
Replied 08 September 2015

OK thanks but please confirm that if it is mentioned in 'will' then son can get his money back b4 distributing among siblings. Also, if instead of father if gift is given for father-mother's joint account then do they both need to mention in their 'will'? Any tax implications involved in it? Thanks...

Miss Rinkal (Student) (1304 Points)
Replied 09 September 2015

If it is given in the will then it can only happen when assets are distributed. There cannot arise any situation that asset is given b4 distribution of other assets in a will. In a will, there can be a situation that his liabilities may be parted away first and balance assets gets distributed.

If the gift is given to father mother both then both needs to give their assent. It depends on the son as to whom has he gifted - father, mother or both. Joint account should not be held as criteria.