Personal Finance

Your Taxes

Sanjiv Chaudhary | Updated on January 16, 2018

If investment in a mutual fund is in “either or survivor” mode, who has to pay the capital gain tax? Do both parties have to share the tax burden or will the first holder alone be liable to tax?

W Sridhar

I understand that the mutual fund in your query is jointly owned and the mode of its operation is “either or survivor”, which would mean that either of the joint owner can make the decisions relating to the funds. In the event of death of one of the joint owner, the other joint owner can make decisions.

Based on the provisions of the Income Tax Act,relating to clubbing of income and the approach followed by the tax authorities, in case of jointly-owned investments, including mutual funds, any income arising from such investments shall be taxable in the hands of the person who has actually invested the funds. It is immaterial whether the person who has made the investment is the first holder of such investments.

For example, if you have invested in a mutual fund in the joint name with your spouse (where the spouse is designated as first holder), in the event of sale of such mutual funds, the capital gain shall be taxable in your hands.

In case the funds have been invested by both the joint owners, the income may be taxed in the hands of each joint owner in the same proportion in which funds have been contributed by them.

Further, the taxability of the mutual fund would depend on the nature of the mutual fund and the period for which it was held before sale.

What are tax rules related to purchase and sale of jewellery? Is sale subject to capital gains tax? Are indexation benefits allowed? I plan to sell my wedding jewellery.

R Gupta

According to the provisions of the Income Tax Act, jewellery is a capital asset and any gain arising from its transfer is subject to capital gains tax.

In case the jewellery is held by the taxpayer for a period of up to 36 months before sale/ transfer, then it is treated as short-term capital asset and the gain, short-term capital gain. If held for more than 36 months before sale/transfer, it is then treated as long-term capital asset and the gain, long-term capital gain.

Short-term capital gain from sale of jewellery is taxed at the applicable slab rates for the individual without any indexation benefit for cost inflation. Long-term capital gain from sale of jewellery is taxed at 20 per cent (applicable rate for FY2016-17) after indexation.

I understand that you intend to sell the jewellery received by you as gift for your wedding. While calculating the capital gain from sale of gifted jewellery, the cost of acquisition shall be the cost to the previous owner, that is, the person who has gifted it to you. Also, the period for which the jewellery was held by the previous owner is also considered for determining the nature of capital asset.

The writer is a practising chartered accountant. Send your queries to

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Published on October 23, 2016
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