I had given Rs 2 lakh by cheque to my wife. Is the same exempt in her hands? She had invested the said sum in shares and mutual fund.

If at all any short term capital gains arise from sale of shares purchased out of this, in whose hands the tax liability will arise? — P. R. Paripurna

There will be no liability to tax on the sum gifted by you to your wife. This would be because Section 56(2)(v), which provides that a sum received without consideration if exceeding Rs 50,000 per annum would be treated as income, also provides for certain exclusions which would also include a sum given by one spouse to another.

You may however note that the short-term capital gain arising from the sale of shares and mutual funds and acquired by your wife from out of the gifted sum will be clubbed in your hands by virtue of Section 64(1).

If, on the other hand, the sum has been given by you to your wife only as a loan, it will not be treated as income in your wife’s hands at the time of receipt of such loan and also the clubbing provisions will not apply.

The short-term capital gain, if any, arising from the sale of shares and mutual funds and acquired by your wife from out of the sum so lent by you will also not be clubbed in your hands and will be assessable only in the hands of your wife.

My wife and I reside in a rented flat and we share the rent paid. Can both of us claim the benefit of deduction under Section 80GG? — Abdul Nadeem

The deduction under Section 80GG is available to an individual or HUF in respect of rent paid for a residential house property, if house rent allowance is not received and where an accommodation is not owned by the assessee or spouse or minor child, and in the case of an HUF by any member of the family.

The deduction would be the least of the following: (a) Rs 2,000 p.m., (b) 25 per cent of adjusted total income, or (c) rent paid less 10 per cent of adjusted total income.

Adjusted total income for this purpose would mean income after all deduction under Chapter VI-A but before deduction under this section. In your case since you and your wife are sharing the rent paid, both of you would be eligible for a deduction under Section 80GG subject to your satisfying the other conditions for the claim of deduction.

I have sold a plot for Rs 1.30 lakh and invested the money in a bank. I was not able to invest the money to buy a new property out of the gain. My father-in-law has gifted a plot to my wife and her brother. My wife and her brother want to construct a residential building jointly on the plot gifted to them. Since my wife has no other income, I am assisting her portion of loan burden by borrowing loan from a bank.

Thus the loan is jointly borrowed in the names of myself, my wife and her brother with the understanding of sharing the borrowing in equal proportion, that is, one half by my wife’s brother and one half by me and my wife. Can I invest my capital gains for the construction of the building by my wife and her brother? If not can I gift my capital gain to my wife and how do I reflect the same in my income-tax return? Can I avail myself of deduction in respect of the interest paid towards the housing loan borrowed? — B. E. Chandrashekhar

You will not be able to get the benefit of claiming deduction in respect of interest on capital borrowed and principal repayment since the house does not belong to you.

On the question of your investing the capital gains in a building which belongs to your wife and her brother, there can be no difficulty from the tax point of view.

Similarly, there will be no difficulty in your gifting your capital gain to your wife and the same may just be brought to the notice of the assessing officer (AO) in the return of income. If however you wish to claim exemption under Section 54F the gain must belong to you but the investment in the property which is in the name of your wife may still qualify you for the exemption.

You may in this connection note the decision of the Madras High Court in CIT vs V. Natarajan (2007 287 ITR 271 Madras) where it has been held that reinvestment in a property in the name of the spouse will qualify for deduction under Section 54

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