Comments
I have invested in an FD, which gives a monthly interest payout, in my wife’s name. She is a homemaker and does not earn any salary. She invests the monthly interest in equity shares on the BSE or NSE from her own demat account. Are the short-term capital gains taxable in her hands or mine?
Sriman
As per the clubbing provisions of Indian tax law, any transfer of an asset to spouse without adequate consideration attracts clubbing provisions and accordingly, the income arising to the spouse out of the asset transferred is taxable in the hands of the transferor spouse.
However, if the spouse re-invests the income earned in any other income-bearing instrument and earns income from it, the second generation income shall be taxable in the hands of spouse only and shall not be clubbed with the transferor’s income.
In your case, the income earned from the fixed deposit would be clubbed with your income and taxed in your hands. However, the capital gains made by your wife by investing in shares in her name earned shall be taxable in her hands and will not get clubbed with your income.
My brother, a retired private sector employee with no pension, wants to sell a plot of land that he purchased 10 years ago. He does not want to invest the proceeds in a new property, since he has a house of his own. Is there any way to avoid capital gains tax after making this transaction?
S Sivasubramanian
As per the provisions of Indian income tax law, any capital asset held for more than three years (other than specified securities) will be treated as a long-term capital asset (LTCA). Long-term capital gains on transfer of such LTCA shall be computed by deducting the indexed cost of acquisition of the asset and the indexed cost of improvement, besides expenditure incurred wholly and exclusively in connection with such transfer, from the gross sale consideration received or accruing on sale of the LTCA.
The resulting gain, if any, will be subject to tax at rate of 20.6 per cent (inclusive of education cess). Your brother’s land will qualify as LTCA and the gain arising from its sale shall be LTCG. In case he does not want to invest in a house property, he may invest the LTCG in specified bonds within six months from the date of such transfer subject to the limit of ₹50 lakh. The LTCG over and above ₹50 lakh shall be taxable at rate of 20.6 per cent.
Readers may mail their queries to >taxtalk@thehindu.co.in
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.