The Hindu Business Line : A tax-free gift to daughter

The provisions of Section 56(2)(v) makes a sum received without consideration as income in the hands of the recipient. This provision, however, makes an exclusion in respect of certain sums which are received by certain relatives.

One of the exclusions is in respect of sums received from an individual by a lineal ascendant or descendant of the individual.

Your daughter being a lineal descendant of yours, this exclusion will operate and the sums received from you by your daughter by way of gift will be taxable neither in your hands nor in hers.

Your understanding that only a gift made to a son will not be taxable is not correct.

This exemption will apply whether the recipient is your son or daughter. No distinction is made by the Act in this regard.

A firm of stock brokers are members of the National Stock Exchange.

They pay sub brokerage to their sub brokers and also incentives to their major clients. Will tax be deductible at source on sub brokerage and incentives that are paid to the sub brokers and clients respectively? — Kishan Agarwal

There is no requirement to deduct tax at source on the incentive paid to the clients as there is no provision for tax deduction at source on such payments.

As regards the sub brokerage paid, again there will be no requirement to deduct tax at source since Section 194-H which deals with tax deduction at source on commission and brokerage makes an express exclusion in respect of transactions in securities.

This being so, both the payments by way of sub-brokerage and incentives will not attract the tax deduction provisions and there will be no requirement to deduct tax at source on these payments.

I took a loan in my wife’s name for buying a house in her name.

I am a salaried employee and I have been repaying the EMIs on the said loan out of my income.

Can I claim the deduction under Sections 80-C and 24 in respect of the principal repayment and the interest on the housing loan? — B.V. Vijaya Kumar

The deduction under Section 80-C in respect of the principal repayment and under Section 24 in respect of the interest on the housing loan can be claimed by the owner of the property.

The question therefore will be whether you are the owner of the house property for the purpose of the claim under these sections.

You may note that the ownership in this context does not refer to the registered ownership but to the real ownership.

In your case if you are able to show on the facts that you are the real owner of the property, the deductions will be available to you though your wife is the registered owner of the property.

What are the tax implications in respect of capital gains on the shares if they were purchased through off market transactions and are sold — after a period of 12 months — through a recognised stock exchange attracting securities transaction tax at the time of sale?

And if the shares were purchased through a recognised stock exchange — where securities transaction tax is paid at the time of purchase — and sold in an off market transaction after 12 months ? — Jagdish Sachdev

The provisions of Section 10(38) provide for an exemption in respect of long-term capital gains where securities transaction tax is payable at the time of sale of the shares. Securities transaction tax is payable in respect of all transactions in shares made through a recognised stock exchange.

Long-term capital gains in shares will mean the gain from sale of shares which were held for a period exceeding 12 months.

Given that you have stated that the gain from the sale of shares are from those that you have held for a period of more than one year, it can be understood that in the first case where the sale of shares is through a recognised stock exchange and securities transaction tax has been paid at the time of sale, the capital gains in this case will be exempt.

In the second case, however, since no securities transaction tax has been paid at the time of sale, the capital gains will not be exempt and tax will be chargeable on such capital gains at 20 per cent in accordance with Section 112 of the Act. This tax rate will have to be increased by the appropriate surcharge and additional surcharge.

You may also note the fact that securities transaction tax has been paid at the time of purchase of the shares will not entitle you to the exemption under Section 10(38) and what is relevant for the purpose of this exemption is the payment of securities transaction tax at the time of sale of the shares and which will be leviable where the transaction is through a recognised stock exchange.

Will it be possible for me to claim the deduction under Section 80-E in respect of interest on education loan amounting to Rs 24,000 where the loan was taken for the education of my son.

This interest relates to the period from April 1, 2007 to March 31, 2008. — N. Raman

The deduction under Section 80E is available in respect of the interest on loan taken from a financial institution or approved charitable institution for pursuing higher education either of the individual or his relative.

The term relative for this purpose will mean the spouse and children of such individual and higher education will mean full time studies for any graduate or post graduate course in Engineering, Medicine, Management or for Post Graduate courses in applied sciences or pure sciences including mathematics and statistics.

The deduction under this section will be available for a period of eight assessment years beginning from the year in which the interest on the loan is paid. Subject to your satisfying these conditions the deduction can be claimed by you.

Mail your queries to

taxtalk@thehindu.co.in

or by post to

‘Tax Talk’, Business Line, Kasturi Buildings,

859, Anna Salai, Chennai-600002

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