Sale Of Jewellery Gifted By Parents Will Invite Capital Gains Tax

The money received on the sale of the diamond necklace is not fully tax-free. The income tax laws provide that the value of any gift received from parents is not to be treated as income of the children irrespective of the value of the gift. So, the value of the diamond necklace will not be treated as your income when it is gifted to you. However, it will be subjected to capital gains tax when sold.

The quantum of the tax liability will depend on the combined period for which you and your mother together held this asset to calculate whether the same is short-term or long-term. Since the combined holding period of your mother and you is more than two years, the profits will be treated as long-term capital gains (LTCG).

The profits will be computed after deducting the cost at which your mother had bought it from the price at which you sell it. You will have to pay LTCG tax at 12.50 per cent on the difference as the same was held for more than 24 months.

Both a son and daughter are coparceners in an HUF established by their father and both acquire interest in the assets of the HUF upon their birth. A coparcener is also entitled to ask for partition of the HUF to claim his/her share in the HUF assets.

So you cannot disentitle your son from his shares in the HUF property by any means. If you wish to expel him, you will have to give him his share in the HUF asset before he is expelled. Both your children are entitled to leave their shares in the HUF property under a Will. In case they do not leave a Will, their share will devolve on their respective heirs.

Do note that as a matter of right, your son cannot claim any shares in your self-acquired property during your lifetime. However if you die without making a valid Will, he will get a share equal to his mother and sister on your demise as class I legal heirs.