By Chirag Nangia
l My wife plans to give my mother some gold which she had inherited. Are there any tax implications on doing this?
Under the Income Tax Act, gifting a moveable property (jewellery in your case) to specific covered “relatives” does not trigger taxation. Therefore, your wife can gift jewellery to your mother without attracting any tax liability in her hands. However, when your mother sells the jewellery received as a gift, she will have to compute and pay taxes.
l My father died three years ago and I am the only daughter. As I stay in another city, I will sell the flat. What tax do I have to pay? —Astha Srivastava
While no income tax liability arises on inheriting property upon death of the father, the subsequent sale will be taxable as ‘capital gains’ in the hands of the recipient. You will have to offer the capital gains on sale of inherited house property, irrespective of whether you have any other income. For tax purposes, capital assets are classified as either short-term or long-term on the basis of the period of holding. An immovable property such as a flat is classified as a long-term capital asset if it is held for a period exceeding 24 months. Else, the same is treated as short- term. In computing the period of holding, the time period for which your father held the property would be included.
Further, gains arising on transfer of immovable property held as long-term capital assets are subject to taxation at the rate of 20%. On the other hand, short-term capital gains are charged to tax at normal rate of tax which is determined on the basis of the total taxable income of the taxpayer. In order to compute capital gains, the indexed cost of acquisition, indexed cost of improvement and expenses (incurred wholly and exclusively in connection with the transfer) shall have to be deducted from the sale consideration of property. Notably, as you acquired the property by way of inheritance or succession, the ‘cost of acquisition’ shall be deemed to be the cost at which your father acquired it. Pertinently, these capital gains shall be exempt in your hands if you reinvest the capital gains in another residential house property within the stipulated time limit of one year before or two years from the date of transfer. In case of construction of a new residential house, the time limit is three years.
l What will be the capital gain category for gilt securities sold after one year?
Gilt funds are essentially debt funds only which invest in bonds and fixed interest-bearing securities issued by the state and central governments. For listed debt funds, gains are classified as long-term if held for a period exceeding one year, else the same are treated as short term. Similarly, gains from sale of unlisted debt funds are categorised as long-term if the debentures are held for more than 36 months.
The writer is director, Nangia Andersen India. Send your queries to email@example.com.