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Tax on relinquishment of inherited business - confused
My father was running a construction business and passed away an year ago. As legal heirs (mother + sister+myself) we relinquished our rights to my father's business partner so he could continue the business smoothly. My family (mother + sister) and I did a separate "family arrangement deed" relinquishing thier specific rights of the business to me so that they didnt have to be involved in long legal process and for sheer reason of convenience.
Hence, I received the total consideration amount of X lacs to my account from the business partner upon reliquishing mine & family rights as legal heirs.
I am planning to construct an extension of our current house for use by my family with the 50% of the consideration money in another 6 months.
1. How will this X amount be treated in the purview of Income Tax at my hand?
2. What are the different deductions/relief that I could get from IT?
3. Do I need to declare this amount after the construction of house or before only?
5. What are the steps I need to follow if I could not declare this amount in the Previous year returns?
I have reached out to many local CA's and none have been able to provide me the correct guidance. So I seek some genuine help here.
Replies (3)
Firstly we need to move Step by Step. First of all we need to determine the form of business your father used to carry his business..
Say your father was a Partner in a Partnership business and after he passed away the remaining partner(s) paid his legal heirs.
As per law, the legal heirs should receive the Amount Standing at his capital balance
Say your father was a Partner in a Partnership business and after he passed away the remaining partner(s) paid his legal heirs.
As per law, the legal heirs should receive the Amount Standing at his capital balance
Amount Standing at his capital balance on the Date of Death plus profits in business on the Date of death plus net of any lendings / borrowings in his name. If amount transferred by partner to legsl heirs is more than that calculated above Tax impkication may arise on the hands of legal heirs.
Initially any amount received on account of Death of a person to his legal heirs is exempt but has to be specially checked under section 10 and the terms of partnership deed made b/w your father and the other partners.
Your case needs personal advice and assistance. More detsils are required to arrive at conclusion rather than writing long theoritical answer and explaning the law to you
Initially any amount received on account of Death of a person to his legal heirs is exempt but has to be specially checked under section 10 and the terms of partnership deed made b/w your father and the other partners.
Your case needs personal advice and assistance. More detsils are required to arrive at conclusion rather than writing long theoritical answer and explaning the law to you
Thank you for your response. The problem is we dont know any affairs or have records of the business, in a way we're blind. We just negotiated a certain consideration for his efforts in business and the partner paid the same to us by relinquishment of our rights.
How would advice on the below now,
1. How will this X amount be treated in the purview of Income Tax at my hand? 2. What are the different deductions/relief that I could get from IT? 3. Do I need to declare this amount after the construction of house or before only? 5. What are the steps I need to follow if I could not declare this amount in the Previous year returns?
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