Your Taxes

My grandmother had some gold ornaments. All the ornaments have been inherited by my mother on her passing away. Is there any income tax or wealth tax liability for the same? Plus, what will be the tax liability if I sell the gold to raise money for my mother?

Pankaj Goel

According to the provisions of Indian tax law, where any asset is received without consideration by an individual in any year, the aggregate fair market value of which exceeds ₹50,000, the whole of the aggregate fair market value of such property shall be chargeable to tax under the head “Income from other sources”. This provision does not apply in case of transfer of assets under a will or by way of inheritance. The income, however, received post-inheritance by the transferee from such assets is treated as the income of the transferee and is taxed in his hands.

In your case, if your mother earns any income by way of sale of the gold ornaments inherited by her, such capital gain (if any) shall be taxed in her hands in the relevant financial year in which the sale takes place. Assuming that the jewellery was held by your grandmother and mother for a combined period of more than 36 months, the gain on sale of the same shall be treated as a long-term capital gain. There are investment opportunities prescribed under the income tax law whereby you may reduce/not pay the long-term capital gain tax liability by investing the capital gain/sale consideration in those prescribed assets. The ornaments inherited by her will, however, do not have any income tax implications on the event of inheritance.

As per the wealth tax provisions, a person is liable to pay wealth tax at the rate of 1.03 per cent on net wealth exceeding ₹30 lakh as on the last day of the financial year (i.e. net wealth as at March 31). Net wealth includes building and land appurtenant thereto, motor cars, jewellery, bullion, furniture, utensils or any other article made of precious metals, yachts, boats aircrafts, urban land and cash in hand subject to specified exclusions. Hence, if your mother’s net wealth (including the jewellery) exceeds ₹30 lakh as on the last day of the financial year, she will be liable to pay wealth tax on the amount over ₹30 lakh. Valuation of jewellery for the purpose of wealth tax is done on the last day of each financial year as per the prescribed rules.

We lived in the US for about 17 years and returned to India in September 2012. We have been paying taxes since we moved back to India with NOR status. Are we eligible to invest in PPF for tax purposes?

Vish

As per Section 80C of the Income Tax Act, contribution to PPF account up to ₹1,50,000 is allowed as deduction provided the contribution is made in the name of oneself/spouse or children. As per the Public Provident Fund (PPF) Act, any resident individual (including NOR) can open a PPF account on his own behalf or on behalf of a minor of whom he is the guardian. Therefore, you will be eligible to claim the deduction under Section 80C for contribution made by you to the PPF account.

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