Applicable Laws

Estate planning in India is anchored in a mix of personal law, statutory Acts, and regulatory guidance. The primary statutes include the Indian Succession Act, 1925 for non‑Hindus, the Hindu Succession Act, 1956 for Hindus, Sikhs, Jains and Buddhists, and the Indian Trusts Act, 1882 for trust creation. Each law defines who can inherit, how assets are transferred, and the formalities required for a will or trust to be enforceable.

In addition to these Acts, the Income Tax Act, 1961 influences the tax treatment of inherited assets, while the Companies Act, 2013 may apply when shares are part of the estate. For investment advisers, SEBI (Securities and Exchange Board of India) regulations impose duties to ensure that advice related to estate planning is suitable, documented, and free from conflicts of interest.

Exam relevance: Questions often ask you to match an Act with its applicable religion or to identify the statutory requirement for a valid will. Missing a single provision can lead to a loss of marks, so memorising the core features of each law is essential.

• Focus on the governing Act for each personal law group.
• Remember that SEBI does not prescribe estate‑planning rules but expects compliance with advisory standards.

The Indian Succession Act, 1925 provides a uniform framework for intestate succession and wills for non‑Hindus. It specifies who is an "executor" and the procedure for probate. The Hindu Succession Act, 1956 introduced the concept of "Class I" heirs and gave daughters equal inheritance rights, a change reinforced by the 2005 amendment.

The Indian Trusts Act, 1882 defines the creation, administration, and termination of trusts. It requires a settlor, a trustee, and a clear trust deed. The Act also outlines fiduciary duties, which are critical when advising high‑net‑worth clients on asset protection.

Understanding these Acts helps you answer scenario‑based questions where a client’s religion or asset type dictates the applicable law. The exam frequently tests the distinction between probate requirements under the Succession Act versus trust registration under the Trusts Act.

While SEBI does not issue specific estate‑planning statutes, its regulations on advisory services are directly relevant. SEBI (Investment Advisers) Regulations, 2013 require advisers to disclose conflicts of interest, maintain records of client instructions, and ensure that recommendations are suitable for the client’s risk profile.

When an investment adviser assists a client with the creation of a will or a trust, the adviser must treat the advice as a "financial product" and comply with suitability assessment under Regulation 18. Documentation of the client’s objectives, asset composition, and tax considerations must be retained for at least five years.

Exam relevance: You may be asked which SEBI regulation mandates record‑keeping for estate‑planning advice. The correct answer is the Investment Advisers Regulations, 2013, specifically the record‑keeping clause.

A valid will under Indian law must be in writing, signed by the testator, and attested by at least two witnesses who are not beneficiaries. The testator must be of sound mind and not under duress. For Hindus, the will can be oral if it is reduced to writing within a reasonable time, but this is rarely accepted by courts.

Probate is the court process that authenticates a will. While probate is not mandatory for all wills, it becomes essential when the estate includes immovable property or when the will is contested. The probate court verifies the executor’s authority and the testator’s capacity.

Exam tip: Remember the three‑step checklist – (1) Written document, (2) Signature of testator, (3) Two independent witnesses. Any deviation leads to invalidity.

A trust is created when a settlor transfers assets to a trustee for the benefit of beneficiaries. Under the Indian Trusts Act, the trust deed must clearly state the trust’s purpose, the assets transferred, and the powers of the trustee. The trustee owes fiduciary duties, including the duty of care, loyalty, and impartiality among beneficiaries.

Two main types of trusts are relevant for estate planning: (i) "Family Trusts" used for asset protection and succession, and (ii) "Charitable Trusts" which enjoy tax exemptions under Section 80G of the Income Tax Act. The distinction influences tax treatment and reporting requirements.

From an exam perspective, you may be asked to identify which Act governs a family trust (Indian Trusts Act) versus a will (Succession Act/Hindu Succession Act) and to list the essential elements of a valid trust deed.

Inheritance itself is not taxed in India, but the assets received may attract capital gains tax when sold. The Income Tax Act classifies gains as short‑term or long‑term based on the holding period of the asset. For listed equities, short‑term gains (held ≤12 months) are taxed at 15%, while long‑term gains (held >12 months) are taxed at 10% above INR 1 lakh. For debt instruments, the thresholds differ (short‑term: 30%, long‑term: 20% with indexation). Understanding these rates is crucial when advising clients on the timing of asset liquidation.

Estate administration expenses such as legal fees, probate costs, and trustee remuneration are deductible from the gross estate before calculating any taxable income. However, the deduction is limited to actual expenses incurred and must be substantiated with receipts.

Exam focus: You may encounter a question asking for the tax payable on the sale of inherited equity shares held for 18 months. Apply the long‑term capital gains rate of 10% after accounting for the cost of acquisition (which is the original purchase price of the deceased).

Common pitfalls include assuming that all Indian citizens follow the Hindu Succession Act, overlooking the need for two independent witnesses on a will, and forgetting that SEBI mandates record‑keeping for estate‑planning advice. Another frequent error is mixing up short‑term and long‑term capital gains thresholds for different asset classes.

To avoid these traps, create a quick reference table in your revision notes that maps personal law groups to the governing Act, and list the essential elements of a valid will and trust. For tax questions, always first identify the asset class and holding period before applying the appropriate rate.

Exam strategy: Read the scenario carefully, pick out the personal law or asset type, and then select the corresponding provision or tax rate. If a question asks for the net estate value, use the simple subtraction formula provided earlier.