My son-in-law works abroad and has sent me Rs 1.75 lakh by remitting the amount in foreign currency in a bank located abroad for investment purposes in India. Will this amount be tax exempt? I intend to transfer this amount to a joint account with the first holder being my daughter to make investments in the name of my daughter. The proceeds of the investments are designed to be automatically credited to the joint account. Apart from my daughter, will I have any income tax liability on the returns, if any, since the original amount is by way of transfer from my account and the returns are credited into an account in which I am the second holder?
Any transfer of funds without any consideration may be categorized under section 56 of the Income-tax Act, which treats it as income from other sources.
However, any sum of money received from any relative is not taxable.
The term “relative” has been defined to include spouse of the individual, brother or sister of the individual, brother or sister of the spouse of the individual, brother or sister of either of the parents of the individual, any lineal ascendant or descendant of the individual, any lineal ascendant or descendant of the spouse of the individual, spouse of persons referred to earlier.
Therefore, the sum of Rs 1.75 lakh received by you from son-in-law without consideration shall not be taxable in your hands by virtue of specific exception. Also, subsequent transfer of money by you to a joint account with your daughter as first holder will not be taxable in the hands of your daughter for the same reason.
Once such money is invested, any income generated from it will be clubbed for tax purposes in the hands of your son-in-law, according to the provisions of section 64(1)(iv) of the Act.
There is an indirect transfer of money by your son-in-law to his spouse (i.e your daughter) and, therefore, any income generated by investing that money shall be clubbed with the income of your son-in-law if he is in the higher income bracket compared with your daughter and the total income exceeds the maximum amount not chargeable to tax.
Equity-linked savings scheme (ELSS) will go extinct from April 2012 as per the proposed direct taxes code (DTC). Will the amount withdrawn after the lock-in period during FY12-13 be taxed?
—Dattatreya Vishwanath Pant
As per the current provisions, any gain arising from redemption/sale of an ELSS unit may not be exempt from tax unless the ELSS qualifies as an equity-oriented fund and is held for more than a year and subject to securities transaction tax.
Section 51(2) of the proposed DTC allows similar exemption for long-term capital gains arising as a result of sale of such equity-oriented fund. The position does not seem to be different under the DTC for ELSS maturing on or after 1 April 2012.
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