Recently gold ETFs have hit the market. In this regard, I have bought and sold gold ETFs this year between April and October. Now, Goldbees is shown in equities segment on NSE. Also, my broker has deducted STT on sale amount. My question is, can I treat it as short term capital gain and pay 10% tax, and if I hold for more than one year can it be tax free?

?Shefali

Gold ETF is a unique product where though it is listed on the exchange, it is not an equity-oriented fund. So, by law, it is not subject to STT and STT should not have been deducted upon sale.

In any case, coming to taxation, since it is not an equity fund, LTCG would be subject to 10% tax and STCG would be at the slab rates applicable to you.

I am 50 years old and I have a son and a daughter aged 17 and 19 respectively. So far I have earmarked a certain sum from my investments for them in terms of needs such as higher education, setting up of house after marriage etc. However, lately, my daughter has taken interest in the stock market and is keen on trying her hand at investing. In this regard, I intend to gift her a small sum as seed capital. And not to leave the other sibling out, I intend to do the same for my son too. Are there any tax implications of this?

?Vilas Shah

In essence, what you are proposing to do is to gift your children money so that they can invest it on their own. It is indeed admirable that you intend to let them try on their own and learn from their experiences, good or bad. There will be no tax on the gifts that you make to them as there is no tax applicable on gifts given by relatives. As per the IT Act, you will qualify to be a relative of theirs. However, in the case of your son, who is a minor (not yet 18 years of age), clubbing provisions will apply. In other words, any income that your son earns will be clubbed in your hands. However, since your daughter has attained majority, clubbing will not be attracted. Therefore, it would be advisable for you to wait for one year till your son turns into major to gift him the amount.

I have purchased a single premium policy where the premium is Rs 50,000. What is the tax status thereon?

?Jayant

In the case of single premium policies, any premium over and above 20% of the sum assured will not be eligible for deduction. Simultaneously, if the premium amount is indeed over 20% of the sum assured, the maturity proceeds will be taxable. The reason for this is that policies that have a single premium which is over 20% of the sum assured are considered more as investment vehicles than insurance proceeds.

I want to know whether professional award component of salary package comes under taxable income,

?Nilesh

Without having the full details, it would be difficult to comment. FA05 has omitted the tax-free gift from an employer to an employee or any family member of the employee on the occasion of some ceremony up to Rs 5,000 per annum.

In your case if the award is a component of the salary, it is certainly taxable.

Can I know what are the different kind of tax exemptions that mutual fund investments offer?

?Vinit

Equity-based MF schemes (65% or more exposure to equities) are governed differently from the debt-based schemes. In both the cases, dividend is tax-free in the hands of the investor. However, there is a dividend distribution tax @14.16% payable by the MF directly to the exchequer in the case of debt-based whereas the equity-based are exempt from this tax.

Equity-based schemes are also exempt from long-term capital gains tax. The short-term capital gains are taxed at 10.3% only.

In the case of debt-based schemes, short-term gains are treated as normal income of the assessee and taxed at the rates applicable to the assessee. The long-term gains will attract tax at 10.3% without indexation or at 20.6% with indexation, whichever is more beneficial to the assessee. In the case of ELSS, there is an additional benefit of deduction u/s 80C.

I am living in the US. I am thinking of buying a property in India. My question is that if I borrow money here in the US to buy a house in India, can the interest paid be deductible against my Indian income. In other words, will the mortgage interest that I pay in the US for the India property be tax deductible in India?

?Anil Zha

Unfortunately the answer is in the negative. Any interest that is payable outside India on which tax has not been paid or deducted and in respect of which there is no person in India who may be treated as an agent under section 163 cannot be deducted in computing your total income for the year. Therefore, if you intend to buy property in India, it is best to avail of housing finance from an Indian institution.

The authors may be contacted at wonderlandconsultants@yahoo.com