Can a numismatic collection be left to a charitable trust or institution — and what are the tax implications?
Yes — a collector can leave their entire collection or specific pieces to a charitable trust or museum through a Will. If the Will specifies a direct bequest of the collection (not a sale-then-donate instruction), Income Tax Act Section 47(iii) applies — the transfer to an approved charitable institution is not a 'transfer' for capital gains purposes, meaning no capital gains tax arises. The institution simply receives the collection. The estate does not receive a Section 80G deduction (that benefit applies to living donors, not deceased persons' estates), but the capital gains exemption is complete.
The capital gains advantage — Section 47(iii)
When a person sells an asset, capital gains are computed on the difference between the sale price and the cost of acquisition. But Section 47(iii) of the Income Tax Act excludes from the definition of 'transfer' any transfer of a capital asset by way of gift or under a Will or by an irrevocable trust to a charitable institution approved under Section 10(23C) or registered under Section 12AA/12AB. If the Will says 'I bequeath my numismatic collection to [charitable institution],' the transfer on death is not a taxable transfer — no capital gains.
This is a significant benefit. A collection acquired for ₹5 lakh that appreciated to ₹80 lakh would generate substantial capital gains on sale. Donated directly to a charity through a Will: zero capital gains on the ₹75 lakh appreciation. The institution receives the full ₹80 lakh market value without any tax leakage.
The Section 80G question — does the estate get a deduction?
Section 80G of the Income Tax Act allows a deduction for donations to approved institutions. But this deduction is available to the person who makes the donation — a living taxpayer. A deceased person's estate is not a separate taxpayer in the same sense; the estate is administered by the executor, and the IT filing for the year of death is the deceased's final individual return. The executor does not file a return for the estate claiming 80G deductions on bequests made through the Will.
The heir who would have received the collection (if it had not been bequeathed to charity) does not get an 80G deduction either — the heir never received the collection and never donated it. The 80G benefit belongs to the donor; testamentary bequests through a Will are made by the deceased, not by the estate or the heirs. The practical conclusion: bequeathing to charity through a Will gives you capital gains exemption (§47(iii)) but not a 80G deduction for your estate. If 80G deduction during life is desired, donate during your lifetime — not through a Will.
The wrong approach — 'sell and donate cash'
If the Will says 'sell my numismatic collection and donate the proceeds to [institution],' the sequence is different: the executor sells the collection (triggering capital gains), and then donates the cash proceeds. The capital gains §47(iii) exemption does not apply because the transfer is a sale, not a direct gift. The donation of cash proceeds may qualify for §80G as a deduction in the estate's final IT computation, but this is less tax-efficient than a direct bequest.
The correct drafting: 'I bequeath my numismatic collection to [Institution Name], an institution approved under the Income Tax Act, for the purpose of [education/public display/preservation of Indian monetary history].' This direct bequest triggers §47(iii) and is tax-free.
ASI and institutional requirements for antiquity-status pieces
For pieces that are 100 or more years old (antiquities under the AATA 1972), the receiving institution should ideally have recognition from the Archaeological Survey of India for proper preservation and custody of antiquity-status items. The bequest through a Will creates a legal transfer of ownership to the institution. The institution must then comply with any AATA obligations for the pieces it holds — particularly if it later wishes to export any piece (which requires an ASI export permit regardless of ownership).
Laws & authorities referenced in this chapter
Income Tax Act 1961 — §47(iii) (transfer by Will to approved charitable institution: not a transfer; no capital gains)
Income Tax Act 1961 — §80G (deduction for donations: applies to living donors; not available to estate for testamentary bequests)
Income Tax Act 1961 — §10(23C), §12AA/12AB (approval and registration of charitable institutions)
Indian Succession Act 1925 — §§118-119 (testamentary disposition to charitable institutions: valid)
Antiquities and Art Treasures Act 1972 — ASI recognition for institutions receiving antiquity-status items
Bequest to charitable institution: valid. Capital gains: ZERO under §47(iii) if Will specifies direct gift of collection (not sell-then-donate). The §47(iii) exemption applies to transfers under a Will to approved charitable institutions. 80G deduction: does NOT apply to testamentary bequests — deduction is for living donors only. Correct drafting: 'I bequeath my numismatic collection to [Institution] for the purpose of [X].' Wrong approach: 'sell and donate proceeds' — triggers capital gains. For 80G benefit: donate during lifetime, not through Will. ASI recognition: recommended for institutions receiving antiquity-status pieces.
This is educational content, not legal advice. For a specific situation, please consult a qualified legal professional. Excerpted from Currency, Coins & The Law by Mayank Agarwal, Part 27: Wills, Trusts, Succession & Marital Property — Will Drafting, Inheritance Tax, Charitable Bequests, Family Trusts, Divorce, Prenuptial Agreements.