Taxation of receipts from share of property

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This discussion explores the tax implications of receiving a share of property, specifically rural agricultural land, after a mother's passing. The recipient, Mr. X, received a cash payment (via cheque) from his maternal uncle as his mother's rightful share. The key question is whether this cash receipt is taxable, and if so, when the tax liability arises. Advice suggests that if the agreement involves relinquishing rights, it could be taxable, but if treated as a gift, it might be tax-free under Section 56(2) of the IT Act.

Mohan Kale

Mohan Kale (Querist)

17 January 2022 Mr.X's mother passed away in June 2020. His mother had her share in her father's property which is received by Mr.X by cheque after her death. What would be the tax treatment, when and how it will become taxable in the hands of Mr.X?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

17 January 2022 Yes. LTCG would be taxable..
More details about of property needed for clarity.

Mohan Kale

Mohan Kale (Querist)

17 January 2022 When? What component? and How? Also I missed to tell that it was a share from agricultural land.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

17 January 2022 Whether the assessee was party to the sale?
Whether the agricultural land was rural or urban?

Mohan Kale

Mohan Kale (Querist)

17 January 2022 No, No. There is no sale. The share is received in cash directly from maternal uncle (by cheque and executing proper agreement between Mr.X and his maternal uncle) and not by adding Mr.X's name in 7/12. What is to be noted is that mother's name was not in 7/12 but she had her legal right. The land is rural agricultural land. As the share is received by Mr.X in cash (i.e. by cheque) my questions are
1.Whether this receipt will be exempted from tax?
2.If no, then when will his tax liability on that share arise?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

17 January 2022 Here if the agreement is executed for any relinquish of rights in the property, it will be taxable.
But if its been treated as gift, then it will be tax free under sec. 56(2) of IT act.

Mohan Kale

Mohan Kale (Querist)

17 January 2022 Thank you very much sir.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

17 January 2022 My Pleasure ...

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