Tax Talk

My daughter becomes a major on January 9, 2013. Till FY 2011-12, her income was clubbed with my income.

My query is that just as an individual is considered to be a senior citizen for a FY if he/she completes 60 years of age anytime during that FY, would the minor also be considered as an independent resident assessee for FY 2012-13? If so, does it mean that a separate I-T Return will have to be filed for her during FY 2012-13 incorporating the entire income earned by her during the year (including the period from April 1, 2012 to January 8, 2013 when she was a minor)?

Or is it that the minor will be considered a major only from January 9, 2013 and hence all her incomes from April 1, 2012 to January 8, 2013 will have to be clubbed with that of her father for FY 2012-13?

— A Sundaram

According to Section 64(1A) of the Income-tax Act, 1961 (‘the Act’) income accruing or arising to a minor child is required to be clubbed with the income of the individual.

The Act does not specify that minor would be considered as a major for the full financial year in which he/she has attained majority. Therefore, the income of the financial year in which the child attains majority is to be split as the income arising during minority and the income arising thereafter. It is only the income arising during minority that gets clubbed in the hands of the parent.

I have sold a plot of land which I owned since 1980 during the fiscal year 2011-12. In April 2011, I received an advance of Rs 7 lakh and further the balance sale consideration of Rs 53 lakh in June 2011 at the time of registry and signing of sale deed.

I deposited the sale consideration in capital gain account scheme. Rs 20 lakh was deposited in Account ‘A’ and Rs 30 lakh in Account ‘B’.

I invested the same towards purchase of a flat in the following manner. The advance received of Rs 7 lakh was paid for confirming the allotment of the new flat in April 2011. I had also paid Rs 4 lakh towards the booking amount prior to the payment of the allotment money.

I would like to invest the amount in account ‘A’ towards the future payment of the cost of the new flat. I would like to keep the amount in account B as a fixed deposit for three years.

Please give advice for tax treatment of the same.

— M Subramanian

The capital gains arising on sale of the plot of land can be claimed as exempt under Section 54F of the Income Tax Act, 1961 (‘the Act’), provided the capital asset which is sold is a long term capital asset i.e. the property is held for a period of more than 36 months. Further, the benefit under this section can be claimed provided the assessee has within a period of three years after the date of such sale constructed a residential house.

Further, the benefit under section 54F can be claimed provided the assessee does not own more than one residential house, other than the new asset, on the date of transfer of the original asset.

Investment in a flat which is under construction will be eligible for benefit under section 54F. However, the net consideration (i.e. full value of consideration less any expenses incurred in connection with the transfer) to the extent invested by you for acquiring the new flat shall be eligible for exemption.

The amount of net consideration which is not appropriated by you towards the purchase of new asset before the date of furnishing of return of income i.e. July 31 should be deposited under Capital Gain Account Scheme before the return is filed, and can be claimed as exempt.

Any amount so deposited and lying unutilised after the expiry of three years from the date of sale of original asset will become taxable as capital gains and the interest earned on such deposit, if any, shall be taxed as income under other sources.

Mail your queries to taxtalk@thehindu.co.in

(The author is a practising chartered accountant.)

COMMENT NOW