Money received from certain relatives is exempt from tax

Any transfer of asset to spouse without adequate consideration attracts clubbing provisions and accordingly the income arising to the spouse out of the asset transferred is taxable in the hands of the transferor spouse


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I had gifted Rs.5 lakh to my spouse, with which she bought some shares. Who will pay the capital gains tax on the sale of these shares?

—Kamal Patel

The entire money received by an individual from any person during any financial year (FY) without consideration, the aggregate value of which exceeds Rs.50,000, is taxable under the head ‘income from other sources’. However, an exemption is available if the money is received from a relative, which includes, among others, the spouse of an individual. Accordingly, the amount of Rs.5 lakh received by your spouse shall not be taxed in her hands.

In this respect, you may examine the documentation or registration and applicability of stamp duty with respect to aforesaid gift transaction.

Further, we understand that your spouse had bought shares using the gifted amount. Hence, it is imperative to examine applicability of clubbing provisions. Any transfer of asset to spouse without adequate consideration attracts clubbing provisions and accordingly the income arising to the spouse out of the asset transferred is taxable in the hands of the transferor spouse.

Therefore, if the shares are sold, the resulting capital gains, if any, shall be taxable, as per the tax law, in your hands based on the aforesaid clubbing provisions.

Further, if your wife re-invests the capital gains in any other income bearing instruments and earns income thereon, then that income shall be taxable in her hands. In this case, clubbing provisions will not be applicable.

If I change two jobs in the same FY and the total taxable income individually in both the organisations didn’t cross the taxable income (but combined income crossed the limit), will I still be taxed for the FY?

—Eric Fernandes

Under the domestic tax law, it is mandatory for an individual whose total income exceeds a specified income threshold to pay appropriate tax as per applicable income tax rates.

Further, the individual has to file his personal income tax return within the prescribed due date.

The total income of an individual includes income from all sources, which could include salary (including salary from all employers in case of change in job during the relevant FY), income from house property, capital gains, other income such as bank interest and income from business or profession.

Accordingly, the salary received by you from both the employers will have to be factored along with the income from aforesaid source of income while computing total income during the relevant FY.

Since the combined income from both the organisations had exceeded specified basic exemption limit (currently Rs.2.5 lakh, assuming you are below the age of 60 years), you would be required to pay income tax as per the applicable slab rates and file the tax return for the relevant FY.

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