My son is an NRI and he wants to gift his earnings to his mother, who is a housewife and has no income. She wants to invest the amount in a residential site in her name. Please let me know tax implications on both the mother and son. Also, should she file I-T return on account of this?
LAKSHMISHA
Gifts will not attract income tax in the hands of the donor. Further, it will not attract taxation in the hands of the recipient if gifts are received from a relative as defined under the income tax act.
Parents are covered under the definition of relatives. As a result, any amount gifted by your son to your wife is not taxable in her hands.
However, any income that your spouse earns from the gift will be taxable in her hands. Further, under the provisions of the Income Tax Act, 1961 an individual is required to file a tax return where:
· the taxable income during the Financial Year (FY) exceeds the maximum amount not chargeable to tax, i.e., ₹2,50,000;
· has deposited an amount or aggregate of the amounts exceeding ₹ 1 crore in one or more current accounts maintained with a banking company or a co-operative bank; or
· has incurred expenditure of an amount or aggregate of the amounts exceeding ₹2 lakh for himself or any other person for travel to a foreign country; or
· has incurred expenditure of an amount or aggregate of the amounts exceeding ₹1 lakh towards consumption of electricity. or
· holds a foreign asset outside India either as a beneficial owner or otherwise
In case, the taxable income of your spouse from the said residential site during the relevant financial year exceeds ₹2,50,000 in any financial year or she fulfils any of the criteria mentioned above, she will be required to file a tax return.
I have an HUF, with demat account. I would like to transfer some shares of a listed entity from HUF to one of its members. This will be done via off-market transaction. The member (or the recipient) will pay fair and adequate consideration (say based on market price on the date of transaction) for this transaction. In such case, what will be the implications from income tax perspective, specifically: a) Will this be treated as sale of shares and HUF becomes eligible for payment of capital gains from this transaction? b) What will be the date of acquisition of these shares for the member (or the recipient)? c) Since these is adequate consideration, won’t this be treated as a gift? d) Also, will there be any difference in taxability, if the recipient is not a member of the HUF?
Ashish Ladha
The shares received by a member from the HUF shall be chargeable to tax in the hands of individual member as it neither is in the nature of gift nor is received from a relative defined under the Act.
a) As per Section 45 of the Act, any profits or gains arising from transfer of capital asset shall be chargeable to tax under the head Capital Gains in the year in which the transfer took place. Transfer of shares by the HUF to its member shall be treated as transfer and HUF shall be liable to pay tax on gains arising from such transfer.
As per Section 112 of the Act, long term capital gain arising from sale of listed securities shall be subject to tax at the rate of 20 per cent where cost has been indexed or at the rate of 10 per cent where the benefit of indexation of cost is not availed. Surcharge, if applicable and health & education cess at 4 per cent shall be payable in addition.
b) The date of acquisition of the shares for the member of the HUF shall be the date when the off-market transaction is initiated and shares are transferred to the member.
c) Given that the shares are transferred by HUF to its individual member for adequate consideration, i.e., at the fair market value of the shares as on the date of transfer, the said transfer cannot be treated as gift.
d) If the shares are transferred to any other person, who is not a member of HUF, there shall be no difference in the income tax treatment discussed above. All the points discussed above shall hold good.
The writer is Partner, Deloitte India. Send your queries to [email protected]
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