NRI tax queries: No tax implication on transfer of investments to spouse

  • Since one's wife is a 'specified relative' as per the Income Tax Act, 1961, there is no tax on gifts made to specified relatives
  • As of now, gains from sale of equity mutual funds which are held for more than 12 months are taxed at 10%, without indexation, if gains exceed 1 lakh

I have mutual funds investments worth 14 lakh across seven to eight schemes. I am planning to move to Sri Lanka by year-end. I wish to continue my systematic investment plans (SIPs). From a tax perspective, should I move all my investments in my wife’s name?

—Dikshant Awasthi

So long as you do not plan to exit from these investments, there is no tax implication for you. You can continue to invest in them post your move to a different country. However, as per Reserve Bank of India’s (RBI) regulations, since you no longer plan to stay in India and are moving to another country for good, you must redesignate your accounts to non-resident accounts. This requires intimating your bank or intermediary. Once they are redesignated, you may continue to invest as before and there will be no tax implication on investments.

In case you decide to transfer these investments to your wife, there is no tax implication on transfer for you or for your wife since your wife is a “specified relative" as per the Income Tax Act, 1961 and there is no tax on gifts made to specified relatives.

Whenever you decide to sell these investments, there will be a tax incidence. As of now, gains from sale of equity mutual funds which are held for more than 12 months are taxed at 10%, without indexation, if gains exceed 1 lakh. Short-term gains, i.e. when these mutual funds are sold before 12 months apply at the rate of 15%. Debt mutual funds are considered long-term when held for more than 36 months and taxed at 20% after indexation of cost. If gains are short-term, they are taxed according to the tax slabs applicable as per your total income. You’ll have to look at tax to be paid according to the rules in force when you sell them and also your residential status at that time.

Archit Gupta is founder and chief executive officer, ClearTax. Queries at mintmoney@livemint.com

Close