Cash received as gift from some relatives is tax exempt

Any transfer of assets to a spouse, without adequate consideration, attracts clubbing provisions


iStockPhoto
iStockPhoto

I had gifted Rs.2 lakh to my spouse, with which she bought some shares. Who will pay the capital gains tax on the sale of these shares?

—Kalpesh Dhar

The entire money received by an individual from any person without consideration, the aggregate value of which exceeds Rs.50,000 in a financial year (FY), is taxable as ‘income from other sources’. But an exemption is available if the money is received from a relative, which includes, among others, the spouse of an individual. Thus, the amount of Rs.2 lakh received by your spouse shall not be taxed in her hands.

However, examine the documentation or registration and applicability of stamp duty with respect to this gift.

Further, your spouse had bought shares using the gifted amount. Any transfer of assets to a spouse, without adequate consideration, attracts clubbing provisions. Accordingly, the income accruing to your spouse from the asset transferred, is clubbed with your income and is part of your taxable income.

Therefore, based on the aforesaid clubbing provisions, if the shares are sold then the resulting capital gains shall be taxable in your hands. If your wife re-invests the capital gains in any other income-bearing instrument and earns income on it, then that income shall be taxable in her hands. In this case, clubbing provisions will not be applicable.

My company changed owners last year and our old provident fund (PF) was closed and a new one begun. Will I be taxed on the old PF amount? I have been in this company for 7 years.

—Sudeshna Saha

The cumulative PF balance withdrawn from a recognised PF triggers tax liability, if an employee does not render continuous services for a period of at least 5 years to the employer. While determining the period of continuous service of 5 years, the period of service rendered to the previous employer is also added if the cumulative PF balance maintained with the old employer has been transferred to the PF account of the current employer. Assuming this was your first job, then there was no transfer of accumulated PF balance from a previous employer. In your case, the cumulative period of service with the company is more than 5 years, no tax would be payable on the accumulated PF balance withdrawn in the FY of receipt.

You may also transfer the accumulated PF balance of the old account to the new PF account. If you withdraw the said accumulated PF balance from new PF account, the period of services rendered (i.e., 7 years) while contributing to old PF account, will also be added. Accordingly, since the aggregate period of services is more than 5 years, there will not be any tax implications.

Withdrawal of the PF will be as per the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, which requires one to have a non-employment period of two months post leaving the job.

Queries and views at mintmoney@livemint.com

READ MORE