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I am a salaried person and assessed in the 30 per cent tax slab. In the past one year, I have been investing in some equity mutual funds in my name as well as in my wife's name. If I now sell some of my units to earn a profit (short-term gains), what will be the tax treatment for the gains made on the investments in my wife’s as well as my name? She is a housewife and has not earned any other income till date.
Milind
As per income tax law, short-term capital gains (STCG) from the sale of equity-oriented mutual funds on which Securities Transaction Tax (STT) has been paid shall be taxable at the special rate of 15.45 per cent, including cess. I understand that you have given money for the investment in mutual funds in your wife’s name. Accordingly, clubbing provisions will be applicable. As per the provisions of income tax law, in case of any transfer of an asset to a spouse without adequate consideration, clubbing provisions are attracted. Accordingly, the income arising to the spouse out of the asset transferred is taxable in the hands of the transferor spouse. In your case, STCG from the sale of equity-oriented funds on which STT is paid, both in your name and your wife’s name, shall be taxable at 15.45 per cent in your hands.
I want sell my late wife’s ornaments, which she purchased in 1994, for my daughter's marriage. Will it attract tax?
RC Jain
Based on the limited facts given, I understand that after the death of your wife, her ornaments got transferred to you under a will. As per Indian income tax law, jewellery is a capital asset. Any income arising from its sale will be taxed as capital gains. In view of the fact that the capital asset has been held for more than 36 months, any gains from its sale would be taxable as long-term capital gains (LTCG) and the benefit of indexation will be available. For the purpose of computing the LTCG, the cost of acquisition of the jewellery shall be the cost at which your wife acquired it. The LTCG so calculated will be subject to tax at the rate of 20.6 per cent, inclusive of education cess and secondary and higher secondary education cess.
The writer is a practicing chartered accountant. Send your queries to >taxtalk@thehindu.co.in
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