Tax Talk

I would like to transfer Rs 10 lakh to my father's account. He is an agriculturist and his income is exempt from tax. Since I have to pay tax on that money, would my father also be required to pay taxes on the amount?

— Yash Pal Taneja

According to the tax provisions, any sum of money received from a relative as gift is exempt from tax. The term relative has been defined in the Income Tax Act and the same includes son. Hence, the sum gifted by you to your father shall be exempt from tax in his hands. However, the income earned from investment of such gifted sum shall be taxable in your father’s hands.

Please note that your father may be asked to explain the receipt of gift in his tax return for which you will, then, have to explain/give complete details.

I am an NRI (from Gulf). I have been investing in debt funds, such as liquid funds, dynamic bond funds, short term debt funds and gilt funds.

For FY13-14, during redemption or transfer to equity funds, TDS is automatically deducted by mutual funds.

I have no other taxable income. As an NRI, will I get a refund (by submitting I-T returns) up to the permissible tax-free income limit of Rs 2 lakh?

In the past, I had invested in an NRO deposit. Tax was deducted at source by the bank on the interest amount and the same was claimed back as tax refund by submitting I-T returns. Since I had no other taxable income and the TDS amount was less than Rs 2 lakh, the TDS amount was refunded.

— Ajay Sreenivasan

It is being assumed that that your residential status in FY13-14 is Non-Resident according to Indian tax laws and the mutual funds were held for less than one year. The gains arising on redemption/sale therefore, will be short-term capital gains.

Short-term capital gains (other than arising from sale of equity shares or equity-oriented mutual funds on which STT has been paid), will be taxable at the applicable slab (for FY13-14, it is Rs 2,00,000 for individuals below 60 years of age). Short-term capital gains arising from the sale of equity shares or equity-oriented mutual funds on which STT has been paid shall be taxable at the special rate of 15.45 per cent (including education cess).

You will also need to file your tax return disclosing the above income and any other taxable income (e.g. bank interest) in India. You can claim the credit for tax deducted at source by the mutual fund company in your tax return. In case the tax deducted at source exceeds the total tax payable, you can claim a refund in your tax return. Else, the balance tax due will have to be deposited with the Indian Government treasury before filing your tax return.

Mail your queries to >taxtalk@thehindu.co.in

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