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Business News/ Money / Calculators/  Gifts made to some relatives of up to `50,000 not taxed
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Gifts made to some relatives of up to `50,000 not taxed

Gains from share transfer acquired by the relative with the money will get clubbed with your income

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If I gift some money to my wife, who stays in India, and she invests it in shares, will the capital gain be treated as her or mine?

—Shivam

If an individual receives money in excess of 50,000 in any financial year without any consideration, such money will be taxed as income from other sources in the hands of the recipient. However, this rule does not apply to money received by any relative, the definition of which includes a spouse. Therefore, gift of money to your wife would not be taxable in her hands.

Gains arising from transfer of shares acquired by your wife with the money gifted by you will get clubbed in your hands as income and taxed accordingly unless the transfer is for adequate consideration or in connection with an agreement to live apart.

Does investing in a real estate investment trust (REIT) in India make sense for a non-resident Indian (NRI) from a tax point of view? Would it be better to invest using money in India, or can I use money from my foreign account as well?

—Diwakar Nath

Currently, there are no enabling provisions in the Foreign Exchange Management Act, 1999 (FEMA) that permit investment by an NRI in REITs.

But given that the market regulator, Securities and Exchange Board of India, had notified REIT regulations recently in September, we could expect some amendments to the FEMA regulations to enable NRIs to invest into units of such funds.

Having said that, as a unit holder, the tax treatment on the income from the units held in REITs is as follows:

a) Capital gains on sale of units would be subject to securities transaction tax and will be exempt from tax in case of long-term capital gains. In case of short-term capital gains, the same would be taxable at 15%;

b) Interest income received from the REIT would be taxable at a beneficial rate of 5% in case of non-residents;

c) Dividend income of a REIT to the extent passed on to the unit holders enjoys tax exemption;

d) Any other income, which has suffered tax at the REIT level, should be exempt in the hands of the unit holder.

In terms of whether you can use money in India or make an inward remittance of foreign currency would depend upon the exchange control regulations. You will have to await the regulations in this respect and then consult your adviser.

Queries and views at mintmoney@livemint.com

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Published: 06 Nov 2014, 05:34 PM IST
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