Seeking Guidance On Tax Implications

[Arjun P]

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My mother passed away in an unfortunate accident last year, and my grandmother also passed away around the same time.

I am seeking guidance regarding the tax implications of the proceeds I have received following their demise, specifically:

• The balance in my mother's savings accounts and fixed deposits. She was a pensioner, and I have duly filed all her Income Tax Returns, including the final return filed posthumously.

• The proceeds from my grandmother's bank balance representing my mother's share, which were maintained in my uncle's account. While my uncle is presumed to have filed her Income Tax Returns, if he has not, can the credited amount be declared as a gift or a personal loan from him? Alternatively, are there any other means to classify this amount as non-taxable income? The amount exceeds five lakh rupees.

• The insurance compensation received from a personal accident insurance policy related to my mother's accidental death.

• The interest earned on any of the above-mentioned amounts while maintained in my savings account.

I do not currently file Income Tax Returns as I am not employed. Kindly advise whether I should file a return this time, considering that the total amount of proceeds I received in the last financial year exceeds twelve lakh rupees.

AI Summary

Inheritance not taxable: death proceeds and insurance benefits are exempt, but post receipt interest is taxable and ITR filing is advisable.
Balances and fixed deposits inherited on a relative's death are treated as inheritance and are not taxable if income of the deceased to date of death was disclosed; interest accruing after transfer is taxable as Income from Other Sources. Sums routed through a third party may be treated as inheritance or, if from a relative, as an exempt gift provided supporting documentation is retained. Insurance compensation on death is exempt as insurance proceeds, though subsequent interest on retained amounts is taxable. Filing an income tax return is advisable to declare taxable interest and evidence exempt receipts.