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Heirs of resident Indians will have to pay UK inheritance tax

This provision will also apply to resident Indians who have purchased properties in the UK by sending money under the liberalised remittance scheme.

Several non-resident Indians and persons of Indian origin have purchased immovable properties, including residential houses, in London and other cities of UK. Such properties are also held through offshsore companies or trusts. I am told that a new inheritance tax has been imposed in the UK. What would be the implications for NRIs and foreign citizens of Indian origin who hold property there? - B K Sharma, Dubai
Inheritance tax has been in force in the UK.  However, in the budget proposals introduced in June this year, the inheritance tax has been extended to cover property investments in the UK through an offshore company or by using a dual structure of an offshore trust and company.  The new amendment will come into force from April 1, 2017 to ensure that the holding structure will effectively be treated as a look-through scheme.
Hence, heirs of those who own property in the UK will be required to pay inheritance tax regardless of the aforesaid tax planning scheme which has been undertaken.  This provision will also apply to resident Indians who have purchased properties in the UK by sending money under the liberalised remittance scheme which permits from the current year annual remittances upto a maximum of $250,000. 
There is no inheritance tax in India and wealth-tax has been abolished with effect from the current financial year 2015-16.  However, UK inheritance tax will have to be paid by heirs of resident Indians on the value of property located in Britain.
My wife has now returned to India and she has got a good job.  She would be able to save a substantial amount every year.  It has been suggested by some advisors that she should subscribe to a systematic investment plan.  I want to know what this means. - L K Rangachary, Doha
A systematic investment plan will require your wife to invest a fixed amount every month.  The investment will be made in mutual funds.  Hence, your wife will purchase a certain number of units depending upon the market value of the unit at the time of purchase.  It is also possible to invest in a fixed number of units every month, in which case the monthly investment will vary.
As your wife will be having taxable income in India, the investment in equity oriented mutual funds will enable her to claim a deduction under section 80-C of the Income-tax Act.  This is now permitted upto a maximum of Rs.150,000 every year, in addition to the intial exemption limit of Rs.250,000 every year.  If your wife also subscribes to the National Pension Scheme, a further amount of Rs50,000 would be deductible from her taxable income.  Hence, income upto Rs450,000 per annum would be totally free of tax.
One of my family members has recently divorced her husband.  Under the terms of settlement, the Court has granted alimony to be paid by the ex-husband to his wife.  Will she have to pay tax in India as the annual amount payable is quite large? - K R Singh, Sharjah
A gift given by an individual to his or her spouse is not treated as income.  Gifts given by a person to a non-relative in excess of Rs50,000 in a financial year are taxable under the head "Income from Other Sources" under section 56(2) of the Income-tax Act. 
However, an alimony received cannot be treated as a gift.  A gift has to be voluntary in nature. An alimony is paid compulsorily by a person to his ex-spouse under a decree of the Court as part of a scheme of settlement for future maintenance.  Such amount cannot be treated as a gift and, therefore, the alimony received would not fall under section 56(2) of the Act.  Courts have taken this view in several cases.
The writer is a practising lawyer, specialising in tax and exchange management laws of India.