The Hindu Business Line : ESOPs in dollars are taxable in rupees

I work for Hewlett Packard, India. Over the years, I have been allotted employees stock options of the parent company in the US. At the time of allotment no money was payable by me but when the ESOPs are sold, I get the difference between the notional allotment price and the sale consideration. These I receive in US dollars. Will such income be taxable in India? — Sadasivan

From the query it appears that you are a resident of India. If that were so, the capital gains will be taxable in India.

However, you may be able to get the benefit of the Double Taxation Avoidance Agreement between India and the US whereby credit may be available in respect of the tax if any paid by you on the gain in the US.

I am 67 years old and am retired. I sold shares of some Indian companies, which I had held for more than three years and some of which were inherited from my father a decade ago. I sold these shares in the last financial year.

Would I be liable for capital gains tax? I also sold a house where I lived for nearly 20 years. With the sale proceeds I purchased two flats one in my name along with the name of my elder son who is in the US and the other jointly among myself, my wife and a son who are in India. I am a US Green Card holder and have no income in India. Will I have to pay capital gains tax in India? — Mani

If the shares have been held by you for a period exceeding 12 months and have been sold through a recognised stock exchange in India, no capital gains tax will be payable by you as the gain will be exempt. If they were not sold through a recognised stock exchange, you will have to pay capital gains tax. You may note that the Securities Transaction Tax will be payable where the sale is through a recognised stock exchange.

On the sale of a house property in India, capital gains would arise and would be taxable in India. You may however claim exemption on reinvestment in another house property under Section 54 of the Income-Tax Act. The exemption available under this Section would be the amount invested in the new house property subject to a maximum of the capital gains arising from the sale of the old property.

On the issue of whether the exemption would be available where the reinvestment is in more than one property, there appears to be a divergence of judicial opinion. The decision which takes a view that the exemption can be claimed in respect of reinvestment in more than one property can be found in D. Anand Basappa v ITO [2004] 91 ITD 53 (Bangalore) while in Mrs Gulshan Banoo R.Mukhi v JCIT [2002] 83 ITD 649 (Mumbai) it was held that the exemption will be available only in respect of reinvestment in one property.

I had invested in a pension fund of the Life Insurance Corporation of India. I had claimed deduction under Section 80CCC in respect of the premium paid. I would like to know whether the pension received from LIC is exempt from tax.

Kindly reply in the light of Section 10(23AAB) that provides for an exemption. — H. N. Rashmi

The exemption under Section 10(23AAB) is not available to you. This exemption is granted to the income of the fund set up by LIC or any other insurer approved by the Insurance Regulatory and Development Authority. The pension received by you under the annuity plan will be taxable in your hands in accordance with sub-section (2) of Section 80CCC.

I purchased a house property comprising two units, with my mother as co-owner.

Of the two units one is self occupied and the other is let on rent.

The interest portion of the EMI paid by me works out to Rs 2,50,000 for the previous year. Can I claim the deduction in respect of interest on the self-occupied property of Rs 1,50,000 and in respect of the let-out portion of Rs 1,00,000 against the rental income from this portion? Will it be possible for me to claim the entire interest, as deduction while my mother is also a co-owner of the property? Please note that the entire EMI is only paid by me. — Prashanth

If you are the real owner of the property, there should be no difficulty in your claiming the entire interest as a deduction. You can claim the interest attributable to the self-occupied portion as a deduction subject to a maximum of Rs 1,50,000. You can also claim against the rental income a deduction in respect of the interest attributable to the let-out portion without any ceiling limit in respect of such deduction.

I recently sold a residential property and there was a capital gain arising from such sale. I invested the proceeds from the sale in the name of my wife. Will I be able to get the benefit of any exemption? — A. K. Gupta

You have not indicated the manner in which you have reinvested the proceeds in the name of your wife. If the reinvestment is in a residential house, exemption would still be available to you though the reinvestment is not your name but in the name of your wife.

The view that the exemption under Section 54 would be available even when the reinvestment is in the name of the spouse is supported by the decision of the Madras High Court in CIT v V. Natarajan [2006] 203 CTR (Mad) 37. Note, however, that income if any arising from the house will be clubbed in your hands by virtue of the Act's Section 64(1).

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