Short-term capital gain on equity share sales

SANJIV CHAUDHARY | Updated on August 03, 2013 Published on August 03, 2013

Any sum of money received from a relative as gift is exempt from tax.

I am a NRI and have been living in Canada for past 6 years. I had invested in shares of Indian companies. I sold few of the shares which I held for less than one year on BSE. The gain is less than Rs 2 lakh. Do I need to pay tax in India?

- AJ

Based on the limited facts mentioned, we understand that your residential status in FY 2012-13 is Non Resident according to the Indian tax law. Further, since you held the shares for less than one year, the income so arisen is short-term capital gain.

Short-term capital gain from sale of equity shares on which STT has been paid shall be taxable at the special rate of 15.45 per cent (including cess).

Slab benefit is available against such short-term capital gains only for resident individuals. Hence, even if your taxable income is less than the maximum amount not chargeable to tax (for FY 2012-13, it is Rs 2 lakh for individuals below 60 years of age), you will be liable to pay tax on the short term capital gains at the rate of 15.45 per cent. You also need to file your tax return disclosing the above income and any other income taxable in India.

My mother has a taxable income of Rs 6 lakh (i.e. 20 per cent tax bracket), while my brother (who is a major) has an income of Rs 1 lakh.

Can she reduce her tax liability by gifting Rs 1.5 lakh to my brother, such that her taxable income falls to Rs 4.5 lakh (i.e. 10 per cent bracket) and my brother's income increases to Rs 3 lakh (also 10 per cent bracket)?

- R Kumar Swami

According to the Income-tax laws, any sum of money received from a relative (which includes mother) as gift is exempt from tax. Hence, the sum gifted by your mother to your brother shall be tax exempt in his hands.

Coming to the question your mother has a taxable income of Rs 6 lakh (say Financial Year 12-13 in the present case). By gifting Rs 1.5 lakh to your brother there will be no change in her tax liability for the year. It may have some impact in the tax payable in the next financial year as the capital sum of Rs 1.5 lakh would belong to your brother and any income derived from the same will be added to his income. You may note that what is being gifted is the capital sum and not the tax liability.

(The author is a practising chartered accountant)

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Published on August 03, 2013
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