While most people think wills are only governed by the Indian Succession Act, the truth is that several other laws play a crucial role in how a will is enforced, interpreted, or even exempted. This edition of the Succession Planning Series (#17) by M2K Advisors explores how laws like the Income Tax Act, Companies Act, FEMA, and SEBI Takeover Regulations interact with wills. Each of these frameworks addresses different but critical aspects—such as transmission of shares, taxation, foreign asset transfers, and what happens during corporate succession. This blog breaks down what each law says, and how it affects both the testator and the beneficiaries. Whether you’re drafting a will or inheriting assets, understanding these cross-legal touchpoints can help avoid tax surprises, legal delays, and regulatory non-compliance.
Other laws relating to Wills
The Indian Succession Act, 1925 may be the core legislation around wills, but it doesn’t operate in isolation. Several other laws impact how a will functions when assets pass hands.
Here are the four other key laws that affect wills in India:
- Companies Act, 2013
- SEBI Takeover Regulations, 1997
- Income Tax Act, 1961
- Foreign Exchange Management Act, 1999
These laws don’t govern wills directly but influence various outcomes—like share transmission, tax liability, disclosure requirements, and foreign compliance—after the death of a testator.
Income Tax Implications
When assets are passed on through a will, how they’re taxed depends on who receives them and how. The Income Tax Act lays out clear treatment for such scenarios.
For the Beneficiary:
- If you receive a capital asset under a will, the Cost of Acquisition and Period of Holding are inherited from the previous owner (the deceased).
- This means if the testator held a house for 10 years, and the beneficiary sells it the next year, it still qualifies as a long-term capital asset.
The Income Tax Act also taxes gifts received without consideration. However:
- If you receive money, movable property, or immovable property for free (or below market value), it would normally be taxed under Income from Other Sources.
- But an exception is carved out for wills—such transfers are not taxed, even if there’s no consideration involved.
So, inheritance through a will is not considered a taxable gift, and won’t attract tax under section 56(2)(x).
For the Testator:
- Any transfer of capital asset through a will is not considered a transfer at all under the Act.
- It does not attract capital gains tax, even if the value of the property is high.
This ensures the estate doesn’t incur a tax burden just for passing property by will.
Things become more layered when it comes to taxation after the death of the testator—particularly for legal representatives and executors.
Taxability in the Hands of the Legal Representative
- A legal representative is liable to file and pay taxes for the income of the deceased from the start of the financial year up to the date of death.
- This liability is limited to the extent of the estate’s capacity—so the legal rep doesn’t have to pay from their own pocket.
- Two separate assessments may happen:
- One as a representative assessee for the income of the deceased.
- One as an individual assessee for their own income.
- These returns cannot be merged.
Taxability in the Hands of Executors
- The Income Tax Act treats executors similarly to legal representatives. Executors:
- Can be administrators or others managing the estate.
- Are liable for income earned by the estate after the date of death.
- Remain responsible until the assets are fully distributed to the legatees or beneficiaries.
- Once the distribution is done, any future income from inherited assets is taxed in the hands of the beneficiaries.
So, from a tax lens, the process is broken into:
- Deceased’s income → taxed in hands of legal rep
- Estate’s income before distribution → taxed in hands of executor
- Post-distribution income → taxed in hands of beneficiary
Each stage has a distinct treatment.
SEBI Implications
Wills don’t just deal with cash and real estate—many testators own shares in listed companies. This brings in SEBI’s (Securities and Exchange Board of India) Takeover Regulations.
These regulations control how shares in listed companies are acquired, especially when there is a substantial change in ownership or control. Under Regulations 3 and 4, a person acquiring a large portion of a company must make a public open offer to give existing shareholders an exit opportunity.
However, there’s an important exemption for wills:
Regulation 10(1)(g) of SEBI Takeover Regulations
Any acquisition of shares by way of succession, transmission, or inheritance is exempt from the obligation to make a public offer.
This means:
- If you inherit a large stake in a listed company through a will, you don’t need to trigger a public announcement or open offer.
- You don’t need to pre-inform SEBI about this inheritance under Regulation 10.
However, there’s a catch:
- Post-inheritance reporting is still required. The new shareholder must update the records and fulfill reporting obligations in line with SEBI rules.
So while succession-based transfers get a regulatory pass, they aren’t invisible. Record updates and compliance still matter.
Companies Act Implications
The Companies Act, 2013 comes into play when the testator holds shares in a private or public company. Upon death, these shares must be transmitted to the rightful heirs.
How does it work?
- Legal heirs or representatives must submit valid documentation to the company.
- This may include:
- A probate of the will
- A succession certificate
- Or a court order
The company, under Section 56(2) of the Companies Act, has the authority to:
- Approve the transmission of shares to the rightful person
- Register the new name in the company’s share register
- Issue revised share certificates in the name of the legal heir or beneficiary
This process must be completed within two months of submission of all required documents.
If the documents are not in order or if there’s any contest over the will, the company has the right to refuse transmission until disputes are resolved.
Succession Knowledge Series
This blog is part of M2K Advisors’ ongoing Succession Planning Series, covering real-world aspects of estate planning, wills, and succession laws in India.
Below is the list of previous editions (in case you missed them). Each one is deeply practical and rooted in Indian law:
- An Introduction to Succession Planning
- Types of Succession in India
- An Introduction to Hindu Succession Act
- Rules of Intestate Succession – Male (Part 1 & 2)
- Succession for Hindu Female
- Key Concepts in Hindu Succession
- Rules of Intestate Succession – Christians
- Introduction to Will – Indian Succession Act
- Drafting a Will
- Registration, Probate, and Letter of Administration
- Attestation, Alteration & Revocation of Wills
- Bequest under the Will
- Legacy under the Will
- Taxation of Trusts (Parts I–IV)
- Contesting a Will & Safeguard Measures
- Landmark Legal Judgments on Wills
Each topic dives deep, stays practical, and is curated by professionals who understand both the legal framework and the real-world scenarios families deal with.
