Can you provide the definition of and inclusions in the term ?relative? under section 56 of Income Tax Act for the purpose of giving and receiving gifts? Also what are the tax implications of such gifts? Is there any gift tax?

?Agrawal

Where any sum of money exceeding Rs 50,000 is received without consideration by an individual or an HUF from any person, the whole of such sum will be charged to income tax of the recipient under the head, Income from Other Sources.

?Provided that this clause shall not apply to any sum of money received

• From any relative.

• On the occasion of the marriage of the individual.

• Under a will or by way of inheritance.

• In contemplation of death of the payer.

• From any local authority.

• From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in Sec. 10(23).

• From any charitable trust or institution.

If the gift amounts received by the donee from all the sources, other than those mentioned above, exceed Rs 50,000, the donee has to treat the entire amount as income for the year and pay income tax thereon.

?Relative? means

i. Spouse

ii. Brother or sister

iii. Brother or sister of spouse

iv. Brother or sister of either parents

v. Any lineal ascendant or descendant

vi. Any lineal ascendant or descendant of the spouse.

vii. Spouse of the persons referred in clauses (ii) to (vi).?

Obviously, his new gift tax has become donee-based.

Note that the donor has to be a relative as per the above definition. Take the instance of X whose mother?s brother is Y. Here, Y is a relative of X (mother?s brother) but X is not a relative of Y (sister?s daughter).

Note also that the phrase any sum of money suggests that the new provisions are applicable to cash gifts only and not other assets such as immovable property or jewellery, etc. In other words, such other assets gifted even by a stranger will be free from tax.

I have a query about Tata Teleservices. I have 10,000 shares, which I have pledged with a bank. Kindly guide me regarding the open offer from DoCoMo. What strategy should I adopt and what will be the tax implications for me were I to accept the offer?

? Sameer Chouhan

NTT DoCoMo Inc, has bought a 26% stake in Tata Teleservices Ltd (TTSL) by paying $2.7 billion (Rs 13,176 crore), becoming the sixth global phone firm to invest in the Indian mobile phone services market in the last 18 months.

The offer price being higher than the market price, a shareholder will do well by opting for selling the shares to the acquirer.

Since this is not a transaction that is taking place on a recognised stock exchange in India, the long-term capital gains are not tax-free.

These will be charged to tax @ 20% with indexation or 10% without indexation. The short-term gains will not carry the concessional tax of 10% but will be treated as normal income of the shareholder.

Recently I read that by buying a mediclaim policy, we can get tax deduction of Rs 15,000.

Currently our office gives us Rs 15,000 per annum under medical benefit. If we produce bills no tax will be levied, else the amount is paid to us at the end of the year, after deducting tax.

If I take a mediclaim now for premium of Rs 15,000 will I be able to avail the above benefit as well or is it only one? Or is it that as far as the total amount doesn?t exceed Rs 15,000, I can get tax rebate?

?Bindu

The mediclaim deduction under Sec 80D is over and above the Rs 15,000 offered to you by your company as reimbursement of medical expenses. The Rs 15,000 that you pay is the premium for medical expenses that one may incur if one requires hospitalisation etc. Whereas, the Rs 15,000 payable by the employer is against day-to-day medical expenses of the employee.

Can long-term capital loss (LTCL) from sale of equity mutual fund be set off against gains from sale of real estate property?

?Sanket

Long-term capital gains arising from redemption of units of equity-based MF schemes is exempt and so is the loss. In other words, you cannot set it off against any gains or any income. The same is the case for long-term capital loss arising from sale of shares on a recognised stock exchange in India.

I had availed of a housing loan in October 2003 and the possession of the house was received in March 2005. The interest of pre-construction period on the loan from October 03 to March 05 was about Rs 88,000, which should have been claimed by me as a deduction in five years starting from FY 2004-05 ie Rs 17,600 per year. However, I forgot about such claim and have till date not claimed the interest of pre-construction period. Can I claim the till date unclaimed amount of Rs 88,000 entirely in this year. If not, what other alternatives are available so that my claim is not lost?

?Avinash Choudhari

There is no provision in the law that allows claiming the entire interest of the pre-construction period in any one year. It should have been claimed, as mentioned in your query in five installments beginning in the year possession was obtained.

You state that the possession was received during FY 04-05. You have forgotten to claim one-fifth of Rs 88,000 for four successive years from FY 04-05 to 07-08. You may claim deduction of Rs 17,600 for the current FY 08-09. You may also file revised return for FY 07-08 if your assessment for the year is not yet complete.

The authors may be contacted at wonderlandconsultants@yahoo.com