Gift up to Rs 50,000 from friend exempt

SC Vasudeva

Q.   How much monetary gift can be given to brothers, sons, daughters, son’s wife, friends and what documents are required?

- RA Sharma

A.   In case of brothers, sons, daughters and son’s wife, there is no limit up to which the amount can be gifted to them. However, gift to your friends can be made to the extent of Rs 50,000. It may be added that provisions of Gift-tax Act, 1958 are not currently applicable.  However, Section 56(2)(x) of the Income-tax Act, 1961 (The Act) provides that in case an aggregate sum of money is received without any consideration from one or more persons during a financial year which exceeds Rs 50,000, the whole of such aggregate amount would be chargeable to tax in the hands of the recipient.

Q. a)    I had purchased a flat at Omaxe, Mullanpur, New Chandigarh, and paid instalments from 2011 to 22.7.2017 every year and got the possession in December 2018.  I sold/got transferred the ownership of that flat to Didar Singh in July 2019. How to calculate long-term capital gain in this case for income-tax purposes? The registration deed was not in my name (being a transfer case by Omaxe). The purchaser has deposited a transfer fee of Rs 60,000 with Omaxe and the ownership was changed in his name. Should the price index be calculated year wise on amount paid since 2011 up to the year of sale? Please advise.

b)   My wife purchased a 100 sq yd plot at Panchkula from HUDA on instalment basis on 28.2.2002 by paying different amounts every year since 2002 for Rs 3,45,603, the registration deed was done during 12/2010. After the registration of the plot in my wife’s name, HUDA demanded enhanced cost for two times and it was paid as under:

Rs 1,48,708 during the financial year 2011-12

Rs 41,040 during the financial  year 2013-14

Rs 67,500  during the financial year 2014-15

Rs 1,13,317 during the  year 2018-19 as final payment before sale.

Now, my wife has sold the plot for Rs 25 lakh during the month of April 2019. Please advise how to calculate long-term capital gain and also how to invest certain amount in REC Bonds etc so as to avoid income tax.

- Mohan Lal Gupta

A.   Your queries are replied hereunder:

a)   You would be entitled to claim that the instalments paid in various years be indexed on the basis of cost inflation index applicable for the years in which instalments were paid. The aggregate of the indexed instalments plus any other charges paid for the purchase of the plot would be deductible from the sale price so as to arrive at the amount of long-term capital gain.

b)   You have not indicated various years in which the instalments were paid to HUDA towards the purchase of plot by your wife. The indexed cost of the plot cannot be computed in the absence of these details. It is, therefore, not possible to compute the amount of long-term capital gain arising on the sale of the plot. The enhanced cost would be indexed on the basis of index applicable for the financial years 2011-12, 2013-14 and 2014-15. The amount of enhanced cost of Rs 1,13,317 having been paid in financial year 2018-19, there would be no benefit of indexation available for such instalment. The index applicable for the financial year 2011-12 is 184, for the financial year 2013-14 is 220 and for the financial year 2014-15 is 240. The base year of 2001-02 is to be taken at 100. The amount of tax on capital gain can be saved by utilising the amount of capital gain towards purchase of tax- saving bonds within six months of the date of sale of plot. The plot having been sold in April 2019, you are left with one month period for the purchase of such bonds. In case you intend to purchase tax-saving bonds, an immediate action should be taken in this regard.