Your Taxes

Can a grandmother give a gift of ₹2 lakh to the wife of a grandson (grand daughter-in-law) and an unlimited amount as a gift to the wife of her son (daughter-in-law)? Will there be a tax implication in the hands of the receivers? Actually, what are the rules related to taxation of gifts received?

Vijay Jain

According to income tax law, where any sum of money, the aggregate value of which exceeds ₹50,000, is received without consideration by an individual in any year from any person, the whole value of such sum shall be chargeable to tax under the head, “Income from other sources”.

The gift so received is not taxed in certain cases, e.g. if any sum of money is received from any relative as defined in the relevant provision. The term relative, as defined in the tax law, includes a son, daughter, lineal ascendant or descendant of the individual and the respective spouses. Accordingly, a mother-in-law and grandmother-in-law get covered in the relative definition. Hence, the sum gifted to the wife of the grandson and the wife of the son is not chargeable to tax in their respective hands. There is no limit on the amount which can be given as a gift to them by the mother-in-law/grandmother-in-law. But the receiver of the gift may be asked to explain the receipt of the gift in their bank accounts to the taxman.

I am a senior citizen having taxable income. I SIP on a number of mutual funds through a bank having a demat account. Does return on investment through a mutual fund for a period of more than three years’ duration attract income tax?

Haradhan Das

According to income tax provisions, a mutual fund is treated as a capital asset and any gain or loss incurred at the time of sale of units will be regarded as income under the head, “capital gain”.

Units of equity-oriented funds held for a period of 12 months are treated as short-term capital assets and units held for a period of more than 12 months are considered as a long-term capital asset.

The tax treatment on sale of equity-oriented mutual funds is as follows:

In case such transaction is chargeable to securities transaction tax, the short-term capital gain is taxed at the rate of 15 per cent (excluding surcharge and cess). Long-term capital gains are exempt from tax. In case such transaction is not chargeable to securities transaction tax, the short-term capital gain is taxed at the applicable slab rate. A long-term capital gain is taxed at the rate of 20 per cent with indexation, or 10 per cent without indexation, whichever is lower (excluding surcharge and cess).

Units of a debt-oriented fund held for a period of more than 36 months are considered as a long-term capital asset. Here, short-term capital gains are taxed at the applicable slab rate.

For sales made on or before July 10, 2014, long-term capital gains are taxed at the rate of 20 per cent with indexation, or 10 per cent without indexation, whichever is lower (excluding surcharge and cess). For sales made after July 11, 2014, long-term capital gains are taxed at the rate of 20 per cent (excluding surcharge and cess).

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