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Money received as gift from certain relatives is tax exempt

Exemption is available if the money is received from a relative, including an individual's children

I am a salaried person staying in Mumbai away from my parents. I send them 15,000 monthly through National Electronic Funds Transfer in my father’s account. Will this amount be taxable in my father’s hands?

—Ashish Shahi

The entire money received by an individual from any person during any financial year (FY) without consideration, the aggregate value of which exceeds 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 children of an individual. Accordingly, the amount received by your father from you shall not be taxable in his hands.

With respect to the transaction, it would be prudent to have documentation in place.

Please note that any subsequent investment made by your father out of the money received from you which has an income element shall be taxable in his hands depending on the nature of income.

I have invested in shares and have held them for less than 12 months. I have paid securities transaction tax (STT) on the sale of those shares. How much short-term capital gains (STCG) tax do I have to pay? If my other income is below the basic exemption threshold, do I still I have to pay tax on the STCG?

—Monica Karve

We have assumed that you have been investing in equity shares of listed Indian companies. If you sell the shares after holding for less than 12 months from the acquisition date, the resultant gains shall be termed as STCG. Further, since you are liable to pay the STT at the time of sale, the said gains shall be taxable at a flat rate of 15.45% (inclusive of education cess).

If your total income minus the said STCG is below the basic income exemption threshold for the FY2014-15, then such STCG shall be reduced by the amount by which the total income so reduced falls short of the basic income exemption limit. The balance STCG shall be taxed at a flat rate of 15.45% (inclusive of education cess).

Additionally, if your total taxable income (including STCG) during the FY2014-15 exceeds 1 crore, surcharge at 10% on basic rate (i.e. 15%) should be applied.

Please note that if the aforesaid shares are held from more than 12 months from acquisition date, then the gains shall be termed as long-term capital gains (LTCG). Since you are liable to pay STT at the time of sale, the said LTCG shall be exempt from tax.

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