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Photo: Mint

It’s advisable to document gifts from relatives through a gift deed

Where a gift is received by you from a specified relative (including mother), the transaction of gift itself will not give rise to any tax implications in either your or your mother’s hands

I have been contributing to the Employees’ Provident Fund (EPF) since 58 months and now I have lost my job. Will I continue earning interest on my contributions in EPF, even if I may not end up getting employed anywhere else? Will my contributions be seized in case I am not able to contribute further?

—Susheela

As per the existing provisions under the Indian Provident Fund (PF) law, a PF account becomes “inoperative" and does not earn further interest, where an employee retires from service after attaining the age of 55 years or migrates abroad permanently or dies and the person or his or her nominee does not apply for withdrawal of his accumulated balance within 36 months. Until such time, interest will continue to accrue on the PF balance. However, no interest will accrue, once the account becomes inoperative.

In your case, it is assumed that you have ceased employment before completing 55 years of age and have not migrated abroad permanently. Therefore, you should be able to earn interest in the PF account till the age of 58 years or until the date of withdrawal, whichever is earlier. Further, just to clarify, your contributions would not be seized due to future non-contribution to PF account.

My mother has sold her house for 19 lakh and wishes to “gift" me the money. I am a widow and wish to use the money to buy a flat for my unmarried daughter in another city in India. Will I have to pay long-term capital gains (LTCG) tax on that money?

—Sarita

Where a gift is received by you from a specified relative (including mother), the transaction of gift itself will not give rise to any tax implications in either your or your mother’s hands. It would be advisable for any such gift to be documented in a legal document through a gift deed and placed in the records.

In relation to LTCG tax implications on the sale of house, the same would be chargeable to tax in the hands of your mother in accordance with the prescribed provisions in this regard. Just because your mother has transferred the funds to you as a gift would not transfer the LTCG tax implications to you.

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

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