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Wealth & Treasury Management

Wealth Transfer & Estate Planning

Estate Planning

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Regulatory Framework

Transferring wealth to the next generation in India is no longer constrained by a dedicated wealth-transfer tax regime — three statutes that once governed this space have all been repealed. The Wealth-tax Act, 1957 stood repealed by the Finance Act, 2015 from Assessment Year 2016-17, removing annual net-wealth taxation. The Estate Duty Act, 1953 was abolished by the Estate Duty (Abolition) Act, 1985, so estates of persons dying on or after 16 March 1985 attract no estate duty. The Gift-tax Act, 1958 was repealed by the Finance (No. 2) Act, 1998 for gifts made on or after 1 October 1998; gifts are now captured, if at all, under Section 56(2)(x) of the Income-tax Act, 1961 as income in the donee's hands, subject to exemptions for gifts received from defined 'relatives' and on specified occasions.

Where a Hindu Undivided Family's ancestral property is being transferred across generations, the Hindu Succession Act, 1956 governs default entitlements: Section 6, as amended in 2005, gives daughters coparcenary rights equal to sons — confirmed to apply retroactively by the Supreme Court in Vineeta Sharma v. Rakesh Sharma (2020) — and Section 8 fixes the order of intestate succession among Class I heirs where no will directs otherwise.

A key downstream consequence for the recipient of transferred wealth: under Section 49(1) of the Income-tax Act, 1961, an inherited or gifted capital asset carries forward the transferor's original cost of acquisition, and under Section 2(42A) Explanation 1(i)(b), the transferor's holding period tacks onto the recipient's — which frequently means an asset transferred yesterday is nonetheless long-term for capital-gains purposes today.

Our engagement covers wealth-transfer structuring (lifetime gifting, testamentary transfer, HUF partition), Section 56(2)(x) exposure review for each transfer route, and capital-gains basis planning for the eventual sale of transferred assets.

Overview

Wealth transfer and estate planning is the structuring of how a family's wealth passes to the next generation — the will, the trust, the nominations and the succession plan, the estate's assets mapped and the structures designed, and the tax positions under the Income-tax Act 1961 and the succession law. The planning is the work of making the family's wealth transfer deliberate, protected and tax-efficient, rather than accidental and costly.

The estate is the family's accumulated wealth, and its transfer is decided by the plan — the will that names the heirs and the executors, the trust that holds and protects the assets, the nominations on the accounts and the policies, and the structures that pass the business and the property. The planning is the discipline of the family's succession, and its gaps are the disputes and the costs the next generation inherits.

The cost of an unplanned estate is the wealth that passes wrong: the intestacy that ignores the family's wishes, the will that is challenged, the assets stuck in the probate and the succession, the tax that the structure should have avoided.

This service is for families planning the transfer of their wealth. We map the estate and the family's goals, draft the wills and the trusts, structure the nominations and the succession under the applicable law, plan the tax positions, and review the plan as the family and the law change — so the wealth transfers to the next generation as the family planned, protected and efficient.

How It Works

  1. 1

    Estate & Goals Mapping

    We map the estate, the family and the transfer goals.

    Harun Raaj & Associates does this1 week
  2. 2

    Will & Trust Structuring

    We draft the wills and the trusts for the estate.

    Harun Raaj & Associates does this2-4 weeks
  3. 3

    Nominations & Succession

    We structure the nominations and the succession under the law.

    Harun Raaj & Associates does this1-2 weeks
  4. 4

    Tax Planning

    We plan the tax positions of the transfer.

    Harun Raaj & Associates does this1 week
  5. 5

    Plan Review

    We review the plan as the family and the law change.

    Harun Raaj & Associates does thisAs required

Frequently Asked Questions

Is there an inheritance tax or estate duty in India that we need to plan for?
India does not currently have an estate duty or inheritance tax — the Estate Duty Act 1953 was repealed in 1985 and has not been re-enacted. Assets inherited through a Will or intestate succession are not taxable in the hands of the inheritor under Section 56(2)(x) of the Income Tax Act 1961, which explicitly excludes property acquired by way of Will or inheritance from the definition of taxable gifts. However, income subsequently earned from inherited assets is fully taxable, and the cost of acquisition for computing capital gains under Section 49(1) of the Income Tax Act 1961 is the cost to the original owner (not the market value at date of inheritance), which can result in significant capital gains on a future sale of appreciated assets. Succession planning must also account for stamp duty on probate and Letters of Administration under each State's Stamp Act.
How should a promoter draft a Will to ensure it is legally valid and tax-efficient?
A Will is governed by Part VI of the Indian Succession Act 1925 for non-Hindus, and for Hindus, Muslims, and Sikhs, it is also valid under the Hindu Succession Act 1956 and personal law. A Will must be in writing, signed by the testator, and attested by two witnesses who must not be beneficiaries under Section 63 of the Indian Succession Act 1925. Registration of the Will under Section 18 of the Registration Act 1908 is optional but strongly recommended as it reduces the risk of challenge and simplifies the probate process. For tax efficiency, the Will should specify which beneficiary receives which asset — particularly appreciated securities and property — so that each beneficiary's holding period and cost basis (under Section 49(1) of the Income Tax Act 1961) can be tracked from the original acquisition by the deceased.
What is a family settlement, and can it be used to divide assets without tax consequences?
A Family Settlement Agreement (FSA) is a document under which family members mutually agree to divide jointly held or disputed assets, recognising pre-existing rights rather than creating new ones. The Supreme Court has held in multiple judgments (including Commissioner of Gift-Tax v. N.S. Getty Iyer) that a bona fide family settlement settling pre-existing claims does not attract gift tax or capital gains tax because there is no transfer of property — only recognition and partition of existing rights. Section 47(i) of the Income Tax Act 1961 exempts a distribution of capital assets on partition of an HUF from capital gains. The FSA must be bona fide, must involve a genuine dispute or need for division, and should be stamped and registered to be enforceable — an FSA made purely as a tax avoidance device has been challenged by the Income Tax Department.
How can gifting strategy reduce the overall family tax burden on investment income?
Gifting appreciated assets to lower-taxed family members (e.g., adult children with no other income) allows future capital gains on sale to be taxed at the donee's slab, not the donor's — provided the recipient is an adult and the assets are genuinely transferred. However, Section 64(1)(iv) of the Income Tax Act 1961 clubs the income of assets gifted to a spouse back with the donor, making spousal gifting ineffective for tax reduction unless consideration equal to fair value is paid. For minor children, Section 64(1A) clubs their income (other than income from their own skill) with the parent having higher income — clubbing ends when the child turns 18. Gifting through a private trust with adult children as beneficiaries can achieve the income-splitting objective while maintaining asset control, but requires careful drafting to avoid the trust being treated as revocable under Section 61 of the Income Tax Act 1961.
What steps should a business owner take today to prepare their estate for a smooth transfer?
The first step is an estate audit — cataloguing all assets (immovable property, listed and unlisted shares, mutual funds, bank accounts, insurance policies, digital assets, and overseas holdings) with their cost of acquisition, indexed cost, and estimated current market value, to model the prospective capital gains liability under Section 45 of the Income Tax Act 1961. Nomination should be updated for all financial instruments — bank accounts under Section 45ZA of the Banking Regulation Act 1949, mutual funds under SEBI (Mutual Funds) Regulations 1996, and insurance policies under Section 39 of the Insurance Act 1938 — as nomination ensures prompt release of assets to nominees even before probate. Shares in a private limited company should be reviewed for transmission provisions in the Articles of Association under Section 56 of the Companies Act 2013. A Lasting Power of Attorney under the Personal Laws (Amendment) Act 2019 and a registered Will should be prepared, and a trusted advisor should be briefed on the location of all documents, locker keys, and digital credentials.

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