My grandfather wants to transfer his shares in my name. Will I have to pay capital gains tax on it?

?Vinay Kumar Agarwal

The gift of shares by your grandfather will not attract either income tax or capital gains tax. However, when you subsequently sell the shares, capital gains tax will be exigible. The cost of the shares would be the cost incurred by your father when he originally acquired it. If these were acquired prior to 1.4.81, their market value as on 1.4.81 has to be taken as your cost of acquisition. Explanation ‘iii’ to Sec 48, defines ‘indexed cost of acquisition to mean an amount, which bears to the cost of acquisition the same proportion as the Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later’.

This means that in the case of an inherited or gifted property, the cost of acquisition is the cost to the original holder (or FMV as on 1.4.81 if the date of purchase is earlier) but the date of acquisition for indexing should be taken as the date of the inheritance or the gift.

However, the character of long or short term depends upon the date of acquisition of the original holder. In case this original holder has also acquired the property by way of gift or inheritance, then it will be the date of the very first holder who purchased or constructed the property.

This may end up in some strange results. For instance, if and when you sell the property, it will be treated as sale of a long-term capital asset, irrespective of your holding period but the ratio for computation of indexed cost will be the CII of FY in which you have sold the property and the FY in which you became its owner.

My father has opened a PPF A/c in the post office in the name of his HUF in the year 2001. The HUF consisted of him as karta, my mother, two sisters and I, of which, my mother and one sister died before my father’s death in the year 2005, leaving behind me and one sister as the members of the HUF. I am the sole inheritor of his property as per his will. The post office authorities are neither pre-maturing the account nor transferring the amount to my HUF account. Kindly inform as to what would happen to the account.

?Gupta

The HUF does not come to an end when its karta expires. The next senior-most male member takes over as karta. This account can be closed only after the expiry of 15 years. Note that a recent amendment to the rules does not permit an HUF to opt for post-maturity continuation or open new PPF accounts. However, an existing account may be continued.

My total income is Rs 1,90,000, including interest on bank fixed deposits. My saving in PPF is Rs 70,000. Can I submit form 15 G to the bank?

?Arun Malhotra

Yes, you can file Form 15-G, since your total income (arrived at by taking cognizance of deductions under Chapter VIA, which includes, Sec 80C, 80D, etc) is below the tax threshold of Rs 1,50,000 (thereby making the tax payable NIL) only if your income from interest is less than your tax threshold. In other words, there are two conditions that need to be satisfied for submitting Form 15H. The first one is that your taxable income needs to be nil. However, your interest income also needs to be lower than the basic exemption limit of Rs 1.50 lakh. If both conditions are satisfied, you may submit Form 15H.

My bank is not providing interest as the cheque was deposited on 2nd and was credited on the 6th. Can you provide the exact rules or circular copy or number, which could be shown to these bank officials?

?Satyendra Jain

The ministry of finance (DEA) letter No F.3(9)-PD/72 dt 4.9.72 states, “When the deposit is made by means of a local cheque or draft by the subscriber, the date of tender of cheque or draft at the Accounts Office will be treated as the date of deposit provided that the related cheque is honoured on presentation for encashment.”

It is really sad that many of the accounts offices, particularly the branches of SBI, are ignorant of the various rules governing PPF. Ultimately the problem does get solved but in the meanwhile a lot of valuable time is wasted and heartburns caused.

I don’t have any PPF account but I will open it in this year. Regarding PPF, I came to know from one of my friends that the PPF account cannot be sealed even if there is a legal issue with the IT department. Is this true?

?Shailesh Patel

As per Sec 9 of PPF Act, the amount standing to the credit of any subscriber in the fund shall not be liable to attachment under any decree or order of any court in respect of any debt or liability incurred by the subscriber. However, income tax authorities can attach PPF accounts to recover tax dues — MOF (DEA) letter No 7/21/88-NS.II dt 10.8.90).

I was recently hospitalised and the payment to the hospital was directly made by the insurance company from whom I had taken out a mediclaim policy. Kindly advise whether I am liable to pay income tax on the amount paid to the hospital by the insurance company.

?A P Thazhathethil

No, you need not pay any tax on the amount paid to the hospital by the insurance company. All insurance proceeds, whether life or general are tax-free in nature.

I am 59 years old. Due to superannuate on attaining the age of 60 years in December 2009. I am covered under the pension scheme 1995, where contribution equivalent to 8.33% of Rs 6,500 (Rs 541/) is deposited with RPFC on a monthly basis out of the employer contribution of provident fund by my employer. Pension has been sanctioned in April 2008, payable w.e.f. January 2008, i.e. on attaining the age of 58 years. Kindly let me know whether pension is taxable, and whether the total amount received for the period since January 2008 shall be taxable income for the Financial Year 2008-09.

?Ram Kumar Goel

Any pension received by an assessee is treated as income under the head ‘salaries’. Consequently, there are no tax benefits

The authors may be contacted at wonderlandconsultants@yahoo.com