Readers' Corner: Taxation

I want to gift some money to my minor niece. What are the tax implications?

There is no tax on making gifts. Therefore, there are no tax implications. However, under the Indian taxation rules, the recipient of gifts may be subjected to tax on certain gifts where the value exceeds Rs 50,000 in aggregate during the financial year (Sec 56 (2) (vii) of the I-T Act, 1961). Gifts from relatives are not taxable. The term "relative" doesn't cover niece. Therefore, if you intend to gift to your minor niece any amount, the entire amount shall be treated as income in her hands where the aggregate value exceeds Rs 50,000 during the relevant financial year. By virtue of clubbing provisions, a minor's income will get clubbed and taxed in the hands of that parent who has a higher taxable income.

I have two houses and am paying off the home loans for both. For the first house, only three years are left to repay the loan and for the second, only three years are over. Now, I have got an offer for the second one. If I use the proceeds of the sale to pay off the loan, can I claim long-term capital gains tax exemption?

Long-term capital gain arising from sale of a house property is exempt if invested in purchase or construction of another house property, subject to prescribed conditions. To get exemption, a person needs to purchase a new house within one year before or two years after transfer of the original house. For under-construction properties, the construction needs to be completed within three years from the date of transfer of the original house. Since you intend to utilise the proceeds to repay the loan, the exemption from long-term capital gains may not be available to you. However, you may save the long-term capital gains by investing the capital gain amount (up to Rs 50 lakh) in specified bonds within six months from the date of transfer.

Kuldip Kumar, partner and leader, personal tax, PwC India, answers your questions

The views expressed are expert's own. Send your queries to yourmoney@bsmail.in