23 April 2010
Dear Sir, Please review my case seriously and let me have your expert opinion.
Background: My Husband is NRI and I am living with him. He pay all his tax in our staying country and not paying any tax in India. His brother is in India and also not paying any tax as his earning is less than 1.5 lakhs/year.
Question #1: Can he gift 5-10 lakh rs . each to his brother, brother's wife, his Mother and Myself? Do we need to give any tax on receiving money from him as a gift? (As he already paid all his tax in his resident country)
Question #2: Suppose if they (his brother, brother's wife, mother) buy shares (Stocks) and sell it in short term (sell before 1 year) basis with a profit of more than 40,000 rs (case I) or 2 Lakh (case II)do they need to pay tax in both case, if yes then how much? Please note, any member of my family in India is not paying any tax because their salary is under 1.5 lakh income band.
20 July 2024
Your case involves multiple aspects related to gifting, taxation on gifts, and taxation on short-term capital gains in India. Here's a detailed response to each of your questions:
### Question #1: Gifting and Taxation
**Can he gift 5-10 lakh rs . each to his brother, brother's wife, his Mother and Myself?**
- **Gifting**: Yes, your husband, being an NRI, can gift money to his brother, brother's wife, mother, and yourself. There are no restrictions on the amount of money that can be gifted to relatives in India.
- **Tax on Gifts**: As per current Indian tax laws: - Gifts received from a relative (which includes brother, brother's wife, and mother) are exempt from income tax under Section 56(2)(x) of the Income Tax Act, 1961. Therefore, any amount gifted by your husband to these relatives will not attract income tax in India. - However, gifts received from non-relatives exceeding Rs. 50,000 in aggregate in a financial year are taxable as income under the head 'Income from Other Sources'. Since your husband is gifting to relatives, this provision does not apply.
- **Documentation**: It's advisable to have a gift deed signed for each gift transaction to document the transfer of funds.
### Question #2: Taxation on Short-term Capital Gains
**Suppose if they buy shares (Stocks) and sell it in short term (sell before 1 year) basis with a profit of more than 40,000 rs (case I) or 2 Lakh (case II) do they need to pay tax in both cases, and if yes, how much?**
- **Taxation on Short-term Capital Gains**: - **Case I (Profit > Rs. 40,000)**: Short-term capital gains (STCG) from sale of shares held for less than one year are taxable. The gains are added to the individual's total income for the financial year. - **Case II (Profit > Rs. 2,00,000)**: The tax liability arises if the total short-term capital gains exceed Rs. 2,00,000 in a financial year.
- **Tax Rate**: Short-term capital gains from shares are taxed at a flat rate of 15% under Section 111A of the Income Tax Act.
- **Basic Exemption Limit**: For individuals, the basic exemption limit for income tax is Rs. 2.5 lakh per annum for taxpayers below 60 years of age. Therefore, if the total short-term capital gains are less than Rs. 2.5 lakh and there is no other income, no tax would be payable.
- **Calculation Example**: If the short-term capital gains for an individual are Rs. 1,80,000 in a year and there is no other income, no tax would be payable because it is below the exemption limit of Rs. 2.5 lakh.
### Conclusion:
- **Gifting**: Gifting by your husband to his relatives (brother, brother's wife, mother, and yourself) is tax-free in India under the provisions mentioned. - **Short-term Capital Gains**: If the short-term capital gains from shares sold within one year exceed Rs. 40,000 or Rs. 2,00,000 (depending on the case), they are taxable at a rate of 15%. However, if the gains are within the basic exemption limit of Rs. 2.5 lakh and there is no other income, no tax would be payable.
It's important to note that tax laws can be complex, and it's advisable to consult with a qualified tax advisor or chartered accountant for personalized advice based on specific details and circumstances.
CAclubindia
