Shares gifted by mother-in-law not treated as income of wife

Shares gifted by mother-in-law not treated as income of wife
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First Published: Wed, Dec 01 2010. 08 55 PM IST
Updated: Wed, Dec 01 2010. 08 55 PM IST
Ask Mint Money | Sachin Vasudeva, Senior partner, SC Vasudeva & Co. Chartered Accountants
In case of income from rent, I am allowed a deduction of 30%. Is the same deduction allowable in case of rent from commercial property, where the builder is giving an “assured rent” as return even before the building is actually rented out? My contract is with a builder who even after actual renting will collect and send the rent to me. Further, he will collect a charge of Rs7 per sq. ft per annum as rent collection charges. Can I claim this charge as a deduction from the rental income separately? I am an individual taxpayer.
—Ritu
The deduction of 30% is allowed only from rental income. If the property is not let out, then the assured return from the builder shall not be the rental income, but will be taxable as income from other sources. Therefore, you cannot claim deduction of 30%.
However, you can claim any actual expenditure incurred by you for earning the assured return from the builder. When the property will be actually let out, the rent received by you shall be taxable as income from house property. In such a case, you will be entitled for 30% deduction. However, you will not be able to claim any expenditure incurred for collecting the rent. Only statutory deduction of 30% shall be allowed from the rental income.
I have opened a new account for my wife with a new permanent account number. Can my mother transfer some of her shares to my wife as a gift? Can such transfer be shown as gift for income-tax purposes? Also, these shares had been purchased more than a year ago. How will the transaction be treated as in the income-tax returns form?
—Aditya
Your mother can transfer the shares in the name of your wife and such gift shall not be treated as income in the hands of your wife as per section 56 of the Income-tax Act. Therefore, no disclosure is required to be made in the returns form.
However, whenever your wife sells these shares, then as per section 64, the income from those shares shall be clubbed with the income of your mother and shall be taxable in the hands of your mother.
In case the shares were purchased by your mother more than a year ago and your wife pays the securities transaction tax at the time of the sale of the shares, then such capital gains shall be exempted and will be shown under exempt income in the income-tax return form of your mother.
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First Published: Wed, Dec 01 2010. 08 55 PM IST