1. Proceeds from sale of wedding gifts invite capital gains tax

Proceeds from sale of wedding gifts invite capital gains tax

Last month, I took a R10-lakh loan for my husband’s business against my gold and silver jewellery...

Updated: February 3, 2015 1:45 PM

Last month, I took a R10-lakh loan for my husband’s business against my gold and silver jewellery. Can I claim deduction to reduce my wealth tax liability?-     Anuradha Goyal

The provisions of the Wealth Tax Act 1957 allow deduction on debts while computing net wealth for levying the wealth tax. However, the deduction is restricted to debts which are incurred on taxable assets. In your case, the loan was borrowed for the purpose other than acquiring a taxable asset (husband’s business). So, you cannot set off of a loan against the value of taxable asset to reduce your wealth tax liability.

I bought bullions from a family friend at a concessional rate of R5 lakh. The fair market value of the bullion would be R7 lakh. With the recent amendments in the laws to tax the buyers in some cases, what would be the tax implication on me? –     Anand Bisht

As per section 56 (2)(vii) of the Income Tax Act where jewellery is received for a consideration which is less than the fair market value of the property and the difference between the two exceeds R50,000, the difference between the fair market value of such property and such consideration shall be taxed as the income of the recipient. In your case, the difference between the fair market value and purchase price is R2 lakh (over Rs 50,000), it shall be taxable under the catergory “income from other sources” at applicable slab rates.

I got a Diwali gift (in kind) from my employer worth R60,000. Is the gift in kind from employer taxable? If it is, what should be the tax amount? –     Pankaj Jaiswal

Under the Income Tax rules, the value of a gift, voucher or a token received by a person from his employer on ceremonial occasions shall be taxable for the employee if the aggregate value of such gifts in the previous year was R5,000 or above. In your case, as the value of the gift exceeds R5,000, the entire sum of R60,000 is subject to tax.

I gave an interest-free loan to my wife 3 years ago. This year my wife used the loan to purchase a house in her name. Will the value of property purchased by her be included in my net wealth for wealth tax purpose? –     PS Rao

Under the Wealth Tax Act, the value of an asset which is transferred directly or indirectly by a husband to his wife is to be included in the hands of husband. In your case, house has been purchased from an interest-free loan given by husband. There is a distinction between the term transfer and loan. In the case of former, some legal interest is created in the ‘transferee’ over the subject matter of transfer, whereas in the case of lending, but for a possessory interest, no other interest is created. Thus, when an interest-free cash loan is given by husband to wife, it cannot be said to be ‘transfer of asset’. Accordingly, the clubbing provision shall not be applicable and the value of house property as on the valuation date shall be included in the net wealth of your wife and not in your hands.

I received gold jewellery worth R8 lakh as a gift from my friends on my wedding. Due to financial difficulty, I want to sell the jewellery. Would there be any tax implications on such gift and sale in my case? – Vikas Madan

Under the Income Tax Act, a gift received on marriage, in form of money or property, is not taxable. Therefore, the gold jewellery received on your marriage is not taxable in your hands. Upon the sale of the jewellery, you would be liable to capital gains tax on the entire net sale consideration, as the cost of the same shall be taken as nil. The nature of capital gain (short or long term) would depend upon the period of holding the jewellery. Long term capital gain (held for over 36 months) is taxable at 20% plus 3% education cess.

By Suresh Surana

The writer is founder of RSM Astute Consulting Group

Send your queries at fepersonalfinance@expressindia.com

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