ESTATE DUTY (AMENDMENT) ACT, 1982 – CIRCULAR NO. 349, DATED 30-8-1982

1. Amendments at a glance

33

ESTATE DUTY (AMENDMENT) ACT, 1982

SECTION/SCHEDULE
PARTICULARS
16A
Interest of deceased in building allotted or leased to him by a co-operative housing society 3-4
33(1)(nn)
Exemption of deposits made by deceased with co-operative housing society in certain cases 5
36(3) and
Valuation of one residential house or part thereof
Explns. 1 & 2
belonging to deceased on the same basis as provided
thereto
under the Wealth-tax Act 6-9
Part I of
Raising of exemption limit and restructuring of rate
2nd Sch.
schedule 10

 

Explanatory Notes

ESTATE DUTY (AMENDMENT) ACT, 1982

Introduction

1. The Estate Duty (Amendment) Bill, 1982, as passed by Parliament, received the assent of the President on August 10, 1982, and has been enacted as Act No. 31 of 1982. This circular explains the substance of the provisions contained in the Estate Duty (Amendment) Act, 1982.

ESTATE DUTY (AMENDMENT) ACT, 1982

2. The provisions of the Estate Duty (Amendment) Act, 1982 (hereinafter referred to as “the Amendment Act”) relate to the following matters :

1. Insertion of a new section 16A in the Estate Duty Act, 1953 (hereinafter referred to as “the principal Act”), relating to interest of the deceased in building allotted or leased to him by a co-operative housing society.

2. Amendment of section 33 of the principal Act by insertion of a new clause (nn) in sub-section (1) to provide for exemption from duty of deposits made by the deceased with a co-operative housing society in certain cases.

3. Amendment of section 36 of the principal Act to provide for valuation of one residential house or part thereof belonging to the deceased on the same basis as provided in the Wealth-tax Act, 1957.

4. Amendment of the Second Schedule to the principal Act for raising the exemption limit to Rs. 1,50,000 and providing for consequent restructuring of the rate schedule.

ESTATE DUTY (AMENDMENT) ACT, 1982

Interest of the deceased in building allotted or leased to him by a co-operative housing society – Section 16A

3. The newly inserted section 16A provides that where at the time of his death the deceased was a member of a co-operative housing society and a building or part thereof allotted or leased to him under a house building scheme of the society, continued to remain allotted or leased to him at the time of his death, he shall, notwithstanding anything contained in any other law for the time being in force, be deemed to be the owner of such building or part. Further the value of any outstanding instalments of the amount payable under such scheme by the deceased at the time of his death to the society towards the cost of such building or part and the land appurtenant thereto shall be allowed as a debt owed by him in relation to such building or part. The Explanation to the section clarifies that “co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912, or any other law for the time being in force for the registration of co-operative societies. The position under the Estate Duty Act in this regard is thus brought on par with that obtaining under section 4(7) of the Wealth-tax Act. The effect of the provision deeming the deceased to be the owner of the building or part allotted or leased to him by the co-operative society will be that the provisions of the Estate Duty Act for exemption of property belonging to the deceased [viz., section 33(1)(m), (mm ) and (n)] and the new provision for valuation of one residential house belonging to the deceased contained in section 36(3) will be applicable in such cases.

ESTATE DUTY (AMENDMENT) ACT, 1982

4. It may be noted that the deeming provision contained in section 16A applies only to cases where the deceased was a member of the co-operative housing society and a building or part thereof allotted or leased to him under a house building scheme of the society continued to remain allotted or leased to him at the time of his death. It is relevant to note that by virtue of the specific provision made in new section 16A, any outstanding instalment of the amount payable by the deceased under such house building scheme to the co-operative housing society at the time of his death will be allowed as a debt owed by him in determining the value of the building or part allotted or leased to him by the society.

[Section 3 of the Amendment Act]

ESTATE DUTY (AMENDMENT) ACT, 1982

Exemption from duty of deposits made by the deceased with a co-operative housing society in certain cases – New clause (nn) in sub-section (1) of section 33

5. Section 33 of the Principal Act provides for exemptions in the computation of the principal value of the estate. The new clause (nn) inserted in sub-section (1) of section 33 provides for exemption from estate duty, of any deposits with a co-operative housing society made by the deceased who was a member of the society and to whom a building or part thereof was allotted or leased under a house building scheme of the society where such deposits had been made under such scheme. The reason for exempting such deposits from estate duty is that by virtue of the deeming provision in new section 16A, the value of the building or part allotted or leased to the deceased by the society is to be included in the principal value of the estate.

[Section 4 of the Amendment Act]

ESTATE DUTY (AMENDMENT) ACT, 1982

Valuation of one residential house or part thereof belonging to the deceased on the same basis as provided under the Wealth-tax Act, 1957

6. The new sub-section (3) inserted in section 36 makes a departure from the method of valuation laid down in sub-sections (1) and (2) of section 36, and provides for a concession in the valuation of one residential house or part thereof belonging to the deceased. This is by way of adopting the basis of valuation laid down by the Wealth-tax Act and the rules made thereunder in valuing a residential house. This concession, however, applies only to the valuation of one residential house or part thereof belonging to the deceased; if the deceased had more than one residential house or part thereof, the accountable person may, at his option, specify in writing, the particular residential house or part thereof to which the provisions of new sub-section (3) are to apply.

ESTATE DUTY (AMENDMENT) ACT, 1982

7. Under the new provisions, the principal value of one residential house or part thereof belonging to the deceased is to be taken at the same value as determined by the Wealth-tax Officer for purposes of assessment of the net wealth of the deceased on the valuation date, immediately preceding the date of the death of the deceased. Where the value of such house or part thereof is not included in computing the net wealth of the deceased, its value is to be determined by the Controller on the said valuation date in accordance with the provisions of the Wealth-tax Act and the rules made thereunder. If, however, such house or part was constructed, acquired or otherwise became the property of the deceased after the said valuation date, the value is to be determined in identical manner as on the date of death of the deceased.

ESTATE DUTY (AMENDMENT) ACT, 1982

8. Where the house was exclusively used by the deceased for residential purposes, the provisions of sub-section (4) of section 7 of the Wealth-tax Act would apply with two modifications. Firstly, the condition of section 7(4) of the Wealth-tax Act that the house should have been used by the  assessee for residential purposes “throughout the period of twelve months immediately preceding the valuation date” occurring therein has been omitted. Secondly, the references to the “option of the  assessee” occurring in section 7(4) of the Wealth-tax Act shall be construed as references to the “option of the accountable person”.

ESTATE DUTY (AMENDMENT) ACT, 1982

9. Two Explanations to section 36(3) have been inserted by the  Amendment Act. Explanation 1 provides that where the value of a house or part adopted in accordance with the provisions of clause (a) of sub-section (3) namely, the value thereof as determined by the Wealth-tax Officer, is varied by an order in any proceeding under the Wealth-tax Act, the value so adopted shall be deemed to be a mistake apparent from the record within the meaning of section 61 of the principal Act and the Controller shall rectify the same by adopting the value as so varied in place of the value originally adopted by him. For this purpose, the period of five years specified in section 61 of the principal Act shall be reckoned from the date of the order under the Wealth-tax Act varying the value of the house or part. Explanation 2 provides that for the purposes of sub-section (3), the expressions “net wealth”, “valuation date” and “Wealth-tax Officer” shall have the same meanings as in the Wealth-tax Act.

[Section 5 of the Amendment Act]

ESTATE DUTY (AMENDMENT) ACT, 1982

Raising of exemption limit and restructuring of rate schedule

10. Part I of the Second Schedule to the principal Act has been substituted by the Amendment Act. Hitherto the nil  rate slab was Rs. 50,000. The next slab in the estate range of Rs. 50,001 to Rs. 1,00,000 was chargeable to estate duty at the rate of 4 per cent of the amount by which the principal value of the estate exceeded Rs. 50,000. The next higher slab in the estate range of Rs. 1,00,001 to Rs. 2,00,000 was chargeable to estate duty at the rate of 10 per cent. The Amendment Act replaced the existing rate schedule by a new rate schedule. Under the new rate schedule, the nil  rate slab has been raised from Rs. 50,000 to Rs. 1,50,000. Thus, no duty would be payable now in cases where the principal value of the estate does not exceed Rs. 1,50,000. In the next slab in the estate range of Rs. 1,50,001 to Rs. 2,00,000, the rate of estate duty will be 10 per cent, that is, the same rate as is applicable on the estate range of Rs. 1,00,001 to Rs. 2,00,000 at present. There is no change in the rates of estate duty in the other slabs. However, as a consequence of the raising of the exemption limit from Rs. 50,000 to Rs. 1,50,000 and the restructuring of the rate schedule relating to the first two slabs as noted above, there will be a uniform reduction of Rs. 7,000 in all cases where the principal value of the estate exceeds Rs. 1,50,000.

[Section 6 of the Amendment Act]

ESTATE DUTY (AMENDMENT) ACT, 1982

Scope and commencement of the Amendment Act

11. The foregoing provisions discussed in paragraphs 3 to 10 of this circular take effect retrospectively from March 1, 1981. It is also relevant to note that the Legislatures of the States of Bihar, Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Maharashtra, Orissa and Tamil Nadu have passed necessary resolutions under article 252 of the Constitution so that these amendments will also apply in respect of agricultural lands situate in the territories comprised in the said States with retrospective effect from March 1, 1981. In relation to estate duty in respect of agricultural lands situated in the territories of other States, the provisions of the Amending Act will also apply from the same date, viz., March 1, 1981, if the Legislatures of these States adopt them by passing appropriate resolutions under article 252 of the Constitution. The effect of the retrospective operation of these provisions from March 1, 1981 will be that they shall apply in relation to the estate of persons who have died on or after the said date.

ESTATE DUTY (AMENDMENT) ACT, 1982

12. In cases where the deceased had died after February 28, 1981 and the principal value of the estate of the deceased has already been determined by the Controller, the accountable persons may, in view of the retrospective effect being given to the amendments under the Estate Duty (Amendment) Act, 1982, make an application to the Controller  under section  61 of the Estate Duty Act for rectification of the assessments in the light of the changes made by the Amending Act.

[Section 2 of the Amendment Act]

 2. Provisions explained

33

ESTATE DUTY (AMENDMENT) ACT, 1982

SECTION/SCHEDULE
PARTICULARS
16A
Interest of deceased in building allotted or leased to him by a co-operative housing society 3-4
33(1)(nn)
Exemption of deposits made by deceased with co-operative housing society in certain cases 5
36(3) and
Valuation of one residential house or part thereof
Explns. 1 & 2
belonging to deceased on the same basis as provided
thereto
under the Wealth-tax Act 6-9
Part I of
Raising of exemption limit and restructuring of rate
2nd Sch.
schedule 10

 

Explanatory Notes

ESTATE DUTY (AMENDMENT) ACT, 1982

Introduction

1. The Estate Duty (Amendment) Bill, 1982, as passed by Parliament, received the assent of the President on August 10, 1982, and has been enacted as Act No. 31 of 1982. This circular explains the substance of the provisions contained in the Estate Duty (Amendment) Act, 1982.

ESTATE DUTY (AMENDMENT) ACT, 1982

2. The provisions of the Estate Duty (Amendment) Act, 1982 (hereinafter referred to as “the Amendment Act”) relate to the following matters :

1. Insertion of a new section 16A in the Estate Duty Act, 1953 (hereinafter referred to as “the principal Act”), relating to interest of the deceased in building allotted or leased to him by a co-operative housing society.

2. Amendment of section 33 of the principal Act by insertion of a new clause (nn) in sub-section (1) to provide for exemption from duty of deposits made by the deceased with a co-operative housing society in certain cases.

3. Amendment of section 36 of the principal Act to provide for valuation of one residential house or part thereof belonging to the deceased on the same basis as provided in the Wealth-tax Act, 1957.

4. Amendment of the Second Schedule to the principal Act for raising the exemption limit to Rs. 1,50,000 and providing for consequent restructuring of the rate schedule.

ESTATE DUTY (AMENDMENT) ACT, 1982

Interest of the deceased in building allotted or leased to him by a co-operative housing society – Section 16A

3. The newly inserted section 16A provides that where at the time of his death the deceased was a member of a co-operative housing society and a building or part thereof allotted or leased to him under a house building scheme of the society, continued to remain allotted or leased to him at the time of his death, he shall, notwithstanding anything contained in any other law for the time being in force, be deemed to be the owner of such building or part. Further the value of any outstanding instalments of the amount payable under such scheme by the deceased at the time of his death to the society towards the cost of such building or part and the land appurtenant thereto shall be allowed as a debt owed by him in relation to such building or part. The Explanation to the section clarifies that “co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912, or any other law for the time being in force for the registration of co-operative societies. The position under the Estate Duty Act in this regard is thus brought on par with that obtaining under section 4(7) of the Wealth-tax Act. The effect of the provision deeming the deceased to be the owner of the building or part allotted or leased to him by the co-operative society will be that the provisions of the Estate Duty Act for exemption of property belonging to the deceased [viz., section 33(1)(m), (mm ) and (n)] and the new provision for valuation of one residential house belonging to the deceased contained in section 36(3) will be applicable in such cases.

ESTATE DUTY (AMENDMENT) ACT, 1982

4. It may be noted that the deeming provision contained in section 16A applies only to cases where the deceased was a member of the co-operative housing society and a building or part thereof allotted or leased to him under a house building scheme of the society continued to remain allotted or leased to him at the time of his death. It is relevant to note that by virtue of the specific provision made in new section 16A, any outstanding instalment of the amount payable by the deceased under such house building scheme to the co-operative housing society at the time of his death will be allowed as a debt owed by him in determining the value of the building or part allotted or leased to him by the society.

[Section 3 of the Amendment Act]

ESTATE DUTY (AMENDMENT) ACT, 1982

Exemption from duty of deposits made by the deceased with a co-operative housing society in certain cases – New clause (nn) in sub-section (1) of section 33

5. Section 33 of the Principal Act provides for exemptions in the computation of the principal value of the estate. The new clause (nn) inserted in sub-section (1) of section 33 provides for exemption from estate duty, of any deposits with a co-operative housing society made by the deceased who was a member of the society and to whom a building or part thereof was allotted or leased under a house building scheme of the society where such deposits had been made under such scheme. The reason for exempting such deposits from estate duty is that by virtue of the deeming provision in new section 16A, the value of the building or part allotted or leased to the deceased by the society is to be included in the principal value of the estate.

[Section 4 of the Amendment Act]

ESTATE DUTY (AMENDMENT) ACT, 1982

Valuation of one residential house or part thereof belonging to the deceased on the same basis as provided under the Wealth-tax Act, 1957

6. The new sub-section (3) inserted in section 36 makes a departure from the method of valuation laid down in sub-sections (1) and (2) of section 36, and provides for a concession in the valuation of one residential house or part thereof belonging to the deceased. This is by way of adopting the basis of valuation laid down by the Wealth-tax Act and the rules made thereunder in valuing a residential house. This concession, however, applies only to the valuation of one residential house or part thereof belonging to the deceased; if the deceased had more than one residential house or part thereof, the accountable person may, at his option, specify in writing, the particular residential house or part thereof to which the provisions of new sub-section (3) are to apply.

ESTATE DUTY (AMENDMENT) ACT, 1982

7. Under the new provisions, the principal value of one residential house or part thereof belonging to the deceased is to be taken at the same value as determined by the Wealth-tax Officer for purposes of assessment of the net wealth of the deceased on the valuation date, immediately preceding the date of the death of the deceased. Where the value of such house or part thereof is not included in computing the net wealth of the deceased, its value is to be determined by the Controller on the said valuation date in accordance with the provisions of the Wealth-tax Act and the rules made thereunder. If, however, such house or part was constructed, acquired or otherwise became the property of the deceased after the said valuation date, the value is to be determined in identical manner as on the date of death of the deceased.

ESTATE DUTY (AMENDMENT) ACT, 1982

8. Where the house was exclusively used by the deceased for residential purposes, the provisions of sub-section (4) of section 7 of the Wealth-tax Act would apply with two modifications. Firstly, the condition of section 7(4) of the Wealth-tax Act that the house should have been used by the  assessee for residential purposes “throughout the period of twelve months immediately preceding the valuation date” occurring therein has been omitted. Secondly, the references to the “option of the  assessee” occurring in section 7(4) of the Wealth-tax Act shall be construed as references to the “option of the accountable person”.

ESTATE DUTY (AMENDMENT) ACT, 1982

9. Two Explanations to section 36(3) have been inserted by the  Amendment Act. Explanation 1 provides that where the value of a house or part adopted in accordance with the provisions of clause (a) of sub-section (3) namely, the value thereof as determined by the Wealth-tax Officer, is varied by an order in any proceeding under the Wealth-tax Act, the value so adopted shall be deemed to be a mistake apparent from the record within the meaning of section 61 of the principal Act and the Controller shall rectify the same by adopting the value as so varied in place of the value originally adopted by him. For this purpose, the period of five years specified in section 61 of the principal Act shall be reckoned from the date of the order under the Wealth-tax Act varying the value of the house or part. Explanation 2 provides that for the purposes of sub-section (3), the expressions “net wealth”, “valuation date” and “Wealth-tax Officer” shall have the same meanings as in the Wealth-tax Act.

[Section 5 of the Amendment Act]

ESTATE DUTY (AMENDMENT) ACT, 1982

Raising of exemption limit and restructuring of rate schedule

10. Part I of the Second Schedule to the principal Act has been substituted by the Amendment Act. Hitherto the nil  rate slab was Rs. 50,000. The next slab in the estate range of Rs. 50,001 to Rs. 1,00,000 was chargeable to estate duty at the rate of 4 per cent of the amount by which the principal value of the estate exceeded Rs. 50,000. The next higher slab in the estate range of Rs. 1,00,001 to Rs. 2,00,000 was chargeable to estate duty at the rate of 10 per cent. The Amendment Act replaced the existing rate schedule by a new rate schedule. Under the new rate schedule, the nil  rate slab has been raised from Rs. 50,000 to Rs. 1,50,000. Thus, no duty would be payable now in cases where the principal value of the estate does not exceed Rs. 1,50,000. In the next slab in the estate range of Rs. 1,50,001 to Rs. 2,00,000, the rate of estate duty will be 10 per cent, that is, the same rate as is applicable on the estate range of Rs. 1,00,001 to Rs. 2,00,000 at present. There is no change in the rates of estate duty in the other slabs. However, as a consequence of the raising of the exemption limit from Rs. 50,000 to Rs. 1,50,000 and the restructuring of the rate schedule relating to the first two slabs as noted above, there will be a uniform reduction of Rs. 7,000 in all cases where the principal value of the estate exceeds Rs. 1,50,000.

[Section 6 of the Amendment Act]

ESTATE DUTY (AMENDMENT) ACT, 1982

Scope and commencement of the Amendment Act

11. The foregoing provisions discussed in paragraphs 3 to 10 of this circular take effect retrospectively from March 1, 1981. It is also relevant to note that the Legislatures of the States of Bihar, Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Maharashtra, Orissa and Tamil Nadu have passed necessary resolutions under article 252 of the Constitution so that these amendments will also apply in respect of agricultural lands situate in the territories comprised in the said States with retrospective effect from March 1, 1981. In relation to estate duty in respect of agricultural lands situated in the territories of other States, the provisions of the Amending Act will also apply from the same date, viz., March 1, 1981, if the Legislatures of these States adopt them by passing appropriate resolutions under article 252 of the Constitution. The effect of the retrospective operation of these provisions from March 1, 1981 will be that they shall apply in relation to the estate of persons who have died on or after the said date.

ESTATE DUTY (AMENDMENT) ACT, 1982

12. In cases where the deceased had died after February 28, 1981 and the principal value of the estate of the deceased has already been determined by the Controller, the accountable persons may, in view of the retrospective effect being given to the amendments under the Estate Duty (Amendment) Act, 1982, make an application to the Controller  under section  61 of the Estate Duty Act for rectification of the assessments in the light of the changes made by the Amending Act.

[Section 2 of the Amendment Act]

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