I transferred some money to my wife's account (she is a home maker) from which she brought some shares in 2011. She sold the shares in 2015 at a loss. She has been filing her returns for some years now. Can she claim the capital loss on the sale of shares brought from gifted money? Income from gifts is subjected to Clubbing provisions u/s 64(1)(iv), but what happens in case of a loss?
11 June 2016
If u r taking about shares listed in the stock market you won't be able to carry forward long term loss.
In case it is any other share then you should be able to claim the loss in the same logic
18 July 2024
When it comes to claiming capital losses on shares purchased with gifted money, the situation is governed by specific tax provisions in India, particularly under Section 64 of the Income Tax Act, 1961, which deals with clubbing of income. Here’s how it typically applies:
### Clubbing of Income Provisions: 1. **Gifted Money**: If you transferred money to your wife, and she used that money to purchase shares, any income (including capital gains) arising from those shares is typically clubbed with your income as per Section 64(1)(iv). This means the income or gains are taxed in your hands, not your wife's, to prevent income splitting.
2. **Capital Losses**: Unlike income, where it's clubbed in your hands, losses from the sale of such shares are treated differently: - **Clubbing of Losses**: There is no provision for clubbing losses under Section 64. Therefore, if your wife sells the shares at a loss, that loss remains hers alone and cannot be set off against your income or used for tax purposes in your returns. - **Claiming the Loss**: Your wife, being the legal owner of the shares and the one who incurred the loss upon their sale, can claim this capital loss in her own Income Tax Return.
### Procedure for Claiming Capital Loss: - Your wife should report the sale of shares and the resulting capital loss in her Income Tax Return (ITR). - The loss can be set off against capital gains from other investments in the same year (short-term losses against short-term gains, and long-term losses against long-term gains). - If the loss cannot be fully set off in the current year, it can be carried forward for up to 8 assessment years to be set off against future capital gains.
### Important Considerations: - Ensure proper documentation and records of the purchase and sale of shares, including any brokerage statements and transaction details. - If there are any inquiries from the Income Tax Department regarding the source of funds used to purchase shares, be prepared to substantiate the transaction.
### Conclusion: In summary, while the income (including gains) from assets purchased with gifted money may be clubbed with your income, any losses arising from such assets are not clubbed. Your wife, being the legal owner of the shares, can claim the capital loss in her Income Tax Return. Ensure all reporting is done accurately and in accordance with tax laws to avoid any discrepancies.
For personalized advice based on your specific situation and the latest tax regulations, consulting with a qualified tax professional or chartered accountant is recommended. They can provide tailored guidance and ensure compliance with all applicable tax laws.
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