In many Indian families, it is common for parents and children to maintain a joint bank account. This arrangement offers convenience — both account holders can deposit or withdraw funds, manage expenses, and ensure easy access to money in case of emergencies.
However, a tax-related question often arises when one account holder passes away. For example, if a father and son share a joint account, what happens when the father dies and the funds are transferred solely to the son’s account? Does the son need to declare this amount in his Income Tax Return (ITR) and pay tax on it?
To clarify the matter, Moneycontrol spoke to tax expert Balwant Jain, who explained how India’s income tax laws treat such situations.
According to Jain, the Income Tax Act, 1961, specifically Section 56(2)(X), outlines the tax rules for gifts. If a person receives gifts — in the form of cash or other assets — worth more than ₹50,000 in a financial year, the value is added to their income and taxed accordingly. If the total value of gifts is ₹50,000 or less, no tax is applicable.
Importantly, the ₹50,000 threshold covers the aggregate value of all gifts received in a year, not just individual items. For example, receiving three separate gifts worth ₹20,000 each would cross the exemption limit and become taxable.
While gift tax rules apply in many situations, there is a key exemption — money or assets received through a will or inheritance do not fall under Section 56(2). India does not have an inheritance tax, which means amounts inherited from a deceased person are completely tax-free for the recipient.
Therefore, if a father passes away and the balance in a joint account is transferred to the son, it is treated as inherited money, not as taxable income. The son is not required to pay tax on it, nor does he need to declare it as income in his ITR.
Jain further explained that the above holds true even if the deceased had multiple children. Suppose a father had more than one son or daughter and did not leave a will before his death — in that case, the funds in the joint account would be divided among all legal heirs according to succession laws.
Regardless of how it is divided, the money is still considered an inheritance and remains outside the scope of income tax. Each heir receives their share tax-free and is not required to report it as income.
Gifts up to ₹50,000 in a financial year are tax-free. Beyond this limit, they are taxable unless specifically exempted.
Inheritance and will proceeds are fully exempt from tax in India, regardless of the amount.
Joint account transfers after death are treated as inheritance, not income, and do not attract tax.
No need to include inherited funds in ITR, as they do not form part of taxable income.
Always keep proper records — such as death certificates and account statements — in case the Income Tax Department seeks clarification.
In conclusion, if you inherit funds from a joint account after the death of a parent, you can rest assured that it will not increase your tax liability. While India imposes tax on certain types of gifts, inherited money is entirely exempt. The only requirement is to maintain proper documentation to prove the source, ensuring a smooth process if any queries arise from tax authorities.
