I own plot of land which I bought in 2005. Now, I want to sell this plot and transfer the money to my son who is a non-resident Indian (NRI) working in the USA, so that he can buy a house there. Can I claim exemption for the house being bought in the US and what will be capital gain implications?
In order to claim exemption on long-term capital gains (LTCG) under Section 54F of the Income-tax Act, 1961 arising from sale of a plot of land, the residential house has to be bought in India and that too in your name. So you will not be able to claim any exemption for the house being bought in US by your son.
However, you can claim exemption under Section 54EC up to Rs 50 lakh by investing in capital gains bonds of prescribed financial institutions within six months from date of sale of the plot of land.
In respect of the balance of capital gains you have the option to pay tax at 12.50 per cent on unindexed LTCG or at 20 per cent after indexation of your cost.
You can remit up to $2.50 lakh every year to your son, but tax collection at source (TCS) will apply on the remittance. Also note that remittance of money to your son will be treated as gift but does not have any tax implications. Please evaluate the tax implication of your gift to your son under the US tax laws.
What is the maximum amount of gift one can make in cash? How many times can one give the cash gift to close relatives during one’s lifetime? Is it necessary to prepare a gift deed while giving the gift?
Though there is no restriction from the point of view of the donor as regards making a cash gift, but the income tax law provides that a recipient cannot accept a cash gift of more than Rs 2 lakh at a time, failing which the recipient can be penalised up to the amount of cash gift so accepted. So one should not make cash gift of more than Rs 2 lakh at a time.
You can also make the gift through a banking transfer. Also note that there is no limit as such on the number of times such gifts can be given. While preparing a gift deed is not necessary, having an affidavit that puts down the gift transaction in writing will be helpful. Acceptance of the gift by the donee is necessary for the transaction of gift to be get completed.
I am the karta of a Hindu Undivided Family (HUF). I want to equally distribute fixed deposits of the HUF worth Rs. 50 lakh between four members of the HUF, excluding myself. Will there any clubbing provisions? Do I also need to make a gift deed to pay out this share of Rs. 12.50 lakh each and should it be notarised on a stamp paper? Currently, the HUF is doing service based business and showing business income u/s 44AD.
Unless all the assets of the HUF are fully distributed among its members through a full partition, the income earned by the members of the HUF in respect of assets received on such partial partition shall continue to be taxed in the hands of an HUF.
No gift deed is required for distributing FDs, but the gifts have to be accepted by the recipient to make the gift transaction conclusive. However, do note that the money given to the daughter will be treated as partial partition of the HUF which is not recognised by the tax laws. So, income accruing to your daughter will be clubbed with the income of the HUF.
The author is a tax and investment expert and can be reached on jainbalwant@gmail.com
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
