No tax on property gifted by grandparent

It would be prudent to document the gift in a legal document viz. a gift deed and place it in your records

Parizad Sirwalla
Updated23 Jul 2018
Photo: iStock
Photo: iStock

My grandmother gifted me two floors of her house on 10 April 2017. The circle rate is 55 lakh each. Do I need to mention it while filing my tax returns?

—Dilip Saksena

Since you have received the gift from a specified relative (i.e. your grandmother), the transfer of this property would not attract tax. It would be advisable for you to document the gift in a legal document viz. a gift deed and place it in your records. You will need to evaluate if there are any stamp duty implications.

If your taxable income for FY18 exceeded 50 lakh, you are required to disclose the value of assets and liabilities held by you as on 31 March 2018. If this reporting is applicable to you, you would need to include the cost at which your grandmother acquired the two floors in the said Schedule. Where such cost is not available and no wealth tax return was filed in respect of such asset by her in the past, the circle rate as on date of gifting the same to you or as on 31 March 2018 can be considered for such reporting.

My wife is a salaried employee and invests in futures. She made a loss of about 90,000. For FY18, which income tax return form would she need to use—ITR-2, ITR-3 or ITR-4? Does she require a business audit to be done?

—Name withheld on request

The classification of income/ loss arising from trading in futures and options on a recognised stock in India needs careful evaluation. Such evaluation will need to be made on the basis of various factors like frequency of trading, nature of investments, volume of transactions undertaken by your wife and such other factors. Accordingly, the said income/loss can be taxed either as business income/ loss (non-speculative) or capital gains/ loss.

In case the income/loss arising from trading in futures and options is treated as business income, your wife will need to use ITR-3. Also, a tax audit is required only if the turnover exceeds 1 crore. There is a method prescribed by the Institute of Chartered Accountant of India (ICAI) for computing such turnover.

If this income/loss is treated as a capital gain/loss, your wife may use ITR-2. Also, no tax audit would be required in such a case, irrespective of the quantum of turnover.

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Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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