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Tax planning through Muslim Wills

If the marriage between Muslims is registered under the Special Marriage Act, then the provisions of Indian Succession Act would apply and they may make a Will bequeathing their property to any person in any manner and absolutely no restrictions are placed

December 31, 2012 11:47 IST | India Infoline News Service
If the marriage between Muslims is registered under the Special Marriage Act, then the provisions of Indian Succession Act would apply and they may make a Will bequeathing their property to any person in any manner and absolutely no restrictions are placed
 
Usually, a person starts thinking about executing a Will when he develops a feeling that he is getting aged or has become so sick that death is on the cards. The expression ‘Will’ means the legal declaration of the intention of a testator with respect to his property which he desires to be carried into effect after his death (See Section 2(h) of the Indian Succession Act 1925). It is always preferable to reduce the Will to writing and get it registered/notarized.

Oral Wills also known as “Privileged Wills” are also permitted under Sections 65 and 66 of the Indian Succession Act 1925 in the case of soldiers or airmen employed in actual warfare or mariners at sea. But oral Wills cannot be made by Hindus as the said sections are not applicable to them.
 
In the absence of a Will in case of Hindus the provisions of the Hindu Succession Act 1956 will apply. In the case of most Christians the Indian Succession Act would apply. A good number of Christians in India prefer to execute a Will whereas it is a rare phenomenon in the case of Hindus.
 
But what about Muslim Wills? Is it permitted? Which law governs it? Are there any restrictions on testamentary disposition of property? Personal law of the Muslims shall apply and a Will is permitted subject to restrictions. This article intends to discuss only about the restrictions placed on the power to make Wills and some of the devices available to get over the same.

 
Restriction on Wills
A Muslim Will carries certain restrictions due to which many Muslims hesitate to make Wills. A Muslim cannot bequeath more than one third of his net estate unless heirs give their consent for a higher bequest. Majority of the Muslims do not wish to create Will even for the permitted one third. The one third rule is based on Sunnat al-nabi i.e. what the prophet has said.
 

Jumping over the hurdles:
Is there any possibility to get over the one third rule mandate? Can a Muslim bequeath more than one-third of his properties to a stranger or any person of his liking? The answer is “yes”. If a Muslim gets his marriage registered under the Special Marriage Act 1954, then he has all the powers of a testator under the Indian Succession Act 1925. It may be noted that the religion of the person is not at all affected by the registration of the marriage under the 1954 Act. He continues to be a Muslim and his rights and duties as a Muslim remains the same except his statutorily acquired power to bequeath the whole of his properties by way of a Will. Many rich Indians are now using this route for the purpose of preparing the Will.
 

Special Marriage Act 1954
Let us now consider some of the relevant provisions of the Special Marriage Act. Section 15 provides that any marriage celebrated before or after the commencement of the Act may be registered under the Act provided it fulfills the following conditions viz:
  • A ceremony of marriage has been performed between the parties and they have been living together as husband and wife
  • Neither party has at the time of registration more than one spouse living
  • Neither party is an idiot or a lunatic at the time of registration
  • The bridegroom must be at least 21 years old; the bride must be at least 18 years old
  • The parties are not within the degrees of prohibited relationship
  • The parties have to file a Notice of Intended Marriage in the specified form to the Marriage Registrar of the district in which at least one of the parties to the marriage has resided for 30 days immediately preceding the date on which such notice is given
The Special Marriage Act further provides in Section 16 the procedure for registration. According to Section 21 of the Act, succession to properties of a person whose marriage is registered under the Special Marriage Act shall be governed by the Act and not the personal law like Muslim law.

Thus, if the marriage between a Muslim and another Muslim is registered under the Special Marriage Act then the provisions of Indian Succession Act would apply and hence he or she shall be in a position to make a Will bequeathing the whole of his/her properties to any person in any manner they deem fit and absolutely no restrictions are placed.
 
Section 59 of the Indian Succession Act provides that any sane person (not a minor) may dispose of his properties by Will. Thus, the one third rule shall not apply and the persons shall continue to be governed by the Muslim law in respect of all other matters except succession/Wills. While he continues to be a Muslim governed by his personal law yet for the limited purpose of preparation of Will the provisions of the Indian succession Act would apply.
 

Tax planning
Some tax planning is possible through Will for those Muslims whose marriage is registered under the Special Marriage Act 1954. The person can bequeath assets giving rise to taxable income to those persons whose income is below the taxable limit or taxable at a lower rate. He can also bequeath assets to those whose income shall be liable to be clubbed under Section 64 of the Income Tax Act 1961. For example, a person has got only a son and daughter and both are married. If the person does not make a Will, the assets shall pass to the son and daughter after his death. Now, if the son and daughter transfer those assets to their respective spouses for reducing the tax burden, it will be clubbed with their respective income making it unworkable. But if his assets are bequeathed to his son’s wife and daughter’s husband, then said income will be assessed in their hands only. Likewise one can think about so many areas of tax planning through Wills.
 

The writer is an LLM and chartered accountant.

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