• My grandmother and cousin gifted me some jewellery on the occasion of my birthday. Is there any tax liability on receipt of such gift? If yes, then what shall be the value of the jewellery for computing tax?
– Gaurav Kumar
Section 56(2)(x) of the Income-tax Act seeks to impose tax in the hands ofa recipient subject to certain conditions. According to this, receipt of property (which may include jewellery) by any person without consideration, the fair market value of which is in excess of Rs 50,000, shall be taxable in the hands of the recipient under the head ‘income from other sources’. However, there is a specific exemption to gifts received from any specified relative. The expression ‘relative’ includes any lineal ascendant of the individual and includes grandparents. Thus, gift received from your grandmother will not be taxable. However, ‘cousin’ does not fall within the definition of ‘relative’. Accordingly, gift received from cousin, the fair market value of which is in excess of Rs 50,000, shall be taxable in your hands under the head ‘income from other sources’. With respect to your query regarding valuation of jewellery, note that in case the value of the jewellery exceeds Rs 50, 000, then taxpayer may obtain the report of registered valuer in respect of the price it would fetch if sold in the open market on the valuation date.
• I work as an interior designer and my husband is a senior manager in a company. We file our individual income-tax returns every year. Recently, I received certain amount as interest free loan from my husband, which I had invested in a fixed deposit with a bank. My query is whether the interest earned on such FD shall be taxable in my hands or in the hands of my husband?
The clubbing provision as given in Section 64(1)(iv) is triggered, where asset is transferred to the spouse for inadequate consideration. In such case, income arising directly or indirectly is clubbed in the hands of the spouse who has transferred it. However, it is important to note that there is a distinction between the term ‘transfer’ and ‘loan’. In the ‘act of transfer’, some legal interest is created in the transferee, while in the case of lending, no interest is created. In this case, an interest free loan is being given to you by your husband. There is no ‘transfer of asset’. Thus, clubbing provision shall not be applicable in this case and accordingly, interest on fixed deposit shall be taxable in your hands. The loan should be repayable.
The writer is the founder of RSM Astute
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