| I have been working in the US since last year and currently have NRI status. Now I want to send some money home to my parents. Are these funds taxable in my hands or my father's? I have already paid tax on the money here. |
| Should I transfer the funds to my own account so that my father can withdraw from the same as per the power of attorney given to him? In such a case should I transfer the funds to my NRE account or to my NRO account? Rishi Talwar Transfer by itself does not create any tax-liability. If the money transferred is capital in nature the question of paying tax thereon does not arise. |
| If your status for the Financial Year (FY) 'April-March' is NRI and if the money transferred is not an income that has arisen out of some nexus with India, either by way of Indian employment or business, the amount is tax-free without any limits. |
| You may freely gift the funds to your father and there would be no tax consequences. However, since you are gifting, it is important to follow proper procedure. |
| It is necessary for the donor to make an offer and the donee to accept the same in black and white. To safeguard against any problems, the donee should request the donor for a gift and then the donor should remit the amount to the donee. |
| Alternatively, the donor can offer the gift. In either case, it is necessary for the donee to accept the gift in writing (maybe through a thank you note). Only then it would be considered as a gift in India. |
| It is better to prepare a gift deed and get it registered (with related stamp duty) but such a precaution is normally needed in the case of high-value gifts, particularly those of real estate. |
| However, note the fact that the income tax department has a right to inquire into the genuineness of the gift to ensure that it is not a payment made for any illegal transaction or for services rendered. |
| There is no income tax on the amount gifted. However, any income earned thereon subsequent to the gift is chargeable to tax. Note that by giving a gift, you lose title to the funds gifted. |
| If the cost of acquisition of bonus shares is considered as nil, is it okay if I calculate long term capital gain (LTCG) of such shares without indexation and pay tax at the flat rate of 10 per cent? |
| For example, if I'm holding some bonus shares for more than a year and I sell 200 shares at the market price of Rs 200. Also assume that I'm carrying forward a long-term capital loss of Rs 15,000. |
| Is it okay, if I set off my carried forward loss of Rs 15,000 with the LTCG (i.e. 200 X 200 - 0 =) of Rs 40,000 and for the rest of the capital gain (i.e. 40,000 - 15,000 = 25,000), I pay tax at the flat rate of 10 per cent i.e. 25,000 X 10 per cent = 2,500 Nilay Hazra Yes, your understanding of the provisions is absolutely perfect. Long-term capital gains are always computed by subtracting indexed cost of acquisition from the sale proceeds. |
| The option of paying tax at 20 per cent of capital gains thus computed with indexation or at 10 per cent on the difference between the sale proceeds and the cost of acquisition, loosely called as gains without indexation is available to the assessee. |
| In the case of bonus shares, the gains with indexation and without indexation are identical and therefore, it is always better to pay tax on these at 10 per cent unless, setoff of carried forward long-term loss (not short-term) is available. |
| The capital losses, incurred during the same financial year have to be set off against the capital gains. Balance losses, can be carried forward for 8 successive years. Balance gains can be setoff against carried forward losses. |
| The assessee may pay tax at 10 per cent on some of the scrips (or transactions) and at 20 per cent on the others during the same year. There is no compulsion to use the same rate on all the scrips' transactions. |
| This option gives the assessee a chance of setting off the loss against that gain which saves the maximum tax. |
| Currently I live in a rented house and claim HRA exemption on the rent paid. Now I intend to purchase a house, however I shall not be staying there. I plan to give it on lease and earn rent thereon. Can I claim HRA if I have my own house? V F Dastoor The HRA exemption is related with the rent paid and can be claimed as long as you pay rent for the house you live in. Merely owning another house does not make you ineligible for the HRA deduction. |
| This confusion arises because there is another section in the ITA, Section 80GG, which allows a deduction on the rent paid as per specified limits. |
| It is Section 80GG that precludes the assessee from owning a house at a place where he ordinarily resides and performs his duties of employment. |
| Even here there are some conditions under which benefit under the section can be taken in spite of owning a house. (Incidentally, Section 80GG is not available if you get HRA). In any case, you may certainly claim HRA exemption and own the house. |
| My income is above Rs 50,000 (the minimum taxable limit), however, by taking advantage of tax benefits, particularly Section 80L, Section 88 and Section 88C, I manage to get it below the taxable limit. Under these circumstances do I need to file tax returns? |
| Also, one of the banks that I have a deposit in did not accept Form 15G as my total income is above Rs 50,000 and therefore cut TDS. How can I claim a refund if I don't have to file tax returns? K T Shenoy Under Section 139(1), every person whose total income during the previous year exceeds Rs 50,000 shall, on or before the due date, furnish a return of his income in the prescribed form. |
| Similarly, every person who falls under the 1-by-6 criterion also is required to file the returns even if his total income is below Rs 50,000. |
| Total income includes total income of any other person in respect of which he is assessable under the Act (clubbing provision). |
| This means that after taking advantage of all exempt incomes and before claiming deductions under chapter-VIA (Section 80L, 80D, etc.) and rebates u/s 88, if the income chargeable to tax is over Rs 50,000, returns are required to be filed. |
| This is so even if the total tax deducted at source covers the tax payable liability more than sufficiently. The author may be contacted at |
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