When a part of the building is forcibly taken by the Municipality for road widening or by any other authority, for any purpose, more often than not, it is found that the other part of the building needs repairs. The compensation received is not enough to make the remaining part of the building habitable. So we have to spend on its upkeep. For this. does the assessee have to pay any capital gain tax?
?Viraj
Under such cases, the assessee may take the cost of repairs, less the compensation received for compulsory acquisition, as additional capital invested in the remaining property. There would be no tax liability at the current juncture, but as and when it is sold or transferred, the original cost with its acquisition date, and the new capital invested with its date, will be taken into consideration for the purpose of computing capital gains.
Normally, when the acquisition is in toto, it attracts the provisions of capital gains as if the owner himself has sold the property. The only difference is that because the authorities take their own sweet time to settle the compensation, as per Sec. 54H the tax is payable for the year during which you receive the compensation.
We strongly feel that in this case, the assessee should be allowed to rework the cost of the remnant property without any tax liability when the property was acquired by damaging part of it.
My son who is doing engineering and is 19 years old, has requested that I should give him some money (approximately Rs. 1-1.5 lakh), which he wants to independently invest in IPOs or the stock market. I want to know, if he makes any sort of capital gains, and he does not have any other taxable income, will this gain be added to my income or that will be his income only?
?Minal Shah
Any gift of money between relatives is totally tax-free. As per the IT Act, a father is a relative of his son and hence any sum gifted by you to your son is tax-free for the both of you. Now, since he is 19 years old, he is a major and hence his income will be independently taxed in his hands and not added to your income.
I am an US citizen and have taken OCI in India. As an OCI, is there anything that says I am not allowed to inherit property? Is there any inheritance tax? If I sell an inherited property, can I transfer the sale proceeds back to the US?
?Sukrut
There is no asset that cannot be inherited as such. Also, as of now, inheritance tax is not applicable in India. However, tax laws are known to change and it would be prudent, if possible, to get ownership of the assets directly now rather than inherit them later on.
Also, sale proceeds of inherited property can be remitted abroad up to a limit of $ 1 million per financial year (April-March). Note that this would relate to net sale proceeds after payment of capital gain taxes applicable.
To put it differently, there is no tax incidence whatsoever upon inheritance. However, as and when you sell the inherited asset, capital gains tax will be payable. Your cost of acquisition would be deemed to be the cost which the original owner (the person who left you the inheritance) paid to acquire the asset.
I am going to abroad for employment in the month of November 2007 .What about my status? Will it be NRI or Resident? What about the tax earned in India / abroad. I have taken home loan from ICICI and the monthly payments are going through salary. Is it necessary to have an NRE account from the same bank or I can open in any bank for the monthly payments. Is it mandatory to inform banks from where I got these credit cards, or have savings account, now that I am going to abroad?
?Uday
Since you are going abroad in the month of November 2007, as you have correctly observed, you have spent more than 182 days in India and hence you would not be an NRI. However, for next year, you would be an NRI.
This is as per your tax status. As per FEMA, you would be a Resident outside India (commonly also referred to as NRI) immediately upon your departure and hence you would be eligible to open NRI related accounts such as NRO and NRE. For 06-07, your global income would be taxable in India, including that you have earned abroad.
If you are being doubly taxed, you may take shelter under the DTAA between India and the host country. You will have to get all your resident accounts redesignated as NRO. You may pay your EMI either through the NRO accounts or NRE account.
?The authors may be contacted at wonderlandconsultants@yahoo.com