Legal Question in Wills and Trusts in India
Dear Sir,
My aunt (my father�s brother�s wife) has left various properties to her relatives in her Will. The Will was made sometime in 2007 and she has recently passed away.
She was fond of me and has also left a property for me which is leased out to a Bank and also has an outstanding loan. The outstanding loan is quite small and I think the loan is about 10% of the property value. The lease rentals are used to service the loan & its repayment. The concerned para in the will reads as below:
�The property measuring about 3,500 Sq.ft (approx) at the 1st floor of my building in Kolkata belongs to me and is leased out to State Bank of India for their Branch till March 2013. As a matter of fact I may state that I am in negotiation with State Bank for early release of a part of the property (about 1,000 sq. ft) which I may sell / lease to someone else on such release from the Bank. By this Will and out of natural love and affection, I bequeath my title, interests and all other rights which I have as owner of this property to Ritu Agarwal. Ritu Agarwal shall be entitled to collect lease rentals from the Bank and shall also pay the remaining outstanding, if any, of the Bank Loan from State Bank. I say without ambiguity that Ritu Agarwal shall be owner of the said property after my death and on grant of probate of this Will, and shall be entitled to mutate her names with the appropriate body, pay the dues on account of property tax and shall have the right to deal with this property as they deem fit. She shall also be entitled to negotiate / interact with State Bank or any outside agency with regard to this property in the manner she deems fit.�
Another para elsewhere in the Will states:
�I also want to make it clear that during the pendency of the Will, if there is sale / disposal of any property or part thereof by me during my lifetime which I propose to bequeath in favour of any beneficiay then such sale / disposal shall not impair the spirit of this Will. On such sale / disposal by me the property or part thereof shall automatically be reduced from the share of the beneficiary whom I proposed to bequeath that particular property. I want to further make it clear that interest of the beneficiaries in remaining properties under this Will shall remain unaltered.�
Post the Will my aunt had got part of the property (about 1,000 sq. ft) released early and has sold it off.
My questions are as under:
1. Are there any stamp duly implications for me to get the property transferred in my name.
2. Are there any income tax implications for me. Would the outstanding loan be treated as consideration or would the bequeathment be treated as out of love and affection and as such would not have any income tax implications.
3. What happens when I inform the Bank of this? Can they ask me to pay the outstanding loan immediately? The loan is a self liquidating loan (i.e. would get repaid fully out of lease rentals).
Thanking you in advance for your advice.
3 Answers from Attorneys
Last question first : The bank will not ask you to pay off the loan unless you are selling the property. The existing arrangement of loan liquidation out of lease rentals may continue without any disturbance unless you decide to alter the arrnagement. Virtually, you will be dealing with the Bank as an absolute owner.
For your other querries you may need to seek advice from a tax consultant. However, it may be added that the outstanding loan will not be treated as a "consideration" as this is covered under the "principle of election" which means you take the property alongwith its liability and leave it if you do not want the liability as sometimes the asset value is just equal or less than the outstanding liability against the property.
If the transfer to you is made after probate of the will, there is no stamp duty involved; however, you should get a transfer deed executed and registered in your favour by the executor of the will.
There should not be no ionvolvement as far as Income Tax is involved.
The bank will not ask you to pay the outstanding loan immediately. The loan will be liquidated on the terms of the laon.
Firstly There will be no risk of Income tax involved secondly bank will not force you to repay instantly thirdly if the will is duly registered then you don't have tp pay any stamp duty by means of transfer,etc.
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