Tax on Property

Tax: In India, we express our love and affection through gifts. Brothers gift sisters on Raksha Bandhan. Parents gift their children on every occasion, especially during the marriage. Grandchildren are the recipients of loads of gifts from grandparents. We often hear of cars being gifted and homes being given to family members.

My grandmother gifted me two floors of her house on 10 April 2017. The circle rate is ₹55 lakh each. Do I need to mention it while filing my tax returns?

—Dilip Saksena

Since you have received the gift from a specified relative (i.e. your grandmother), the transfer of this property would not attract tax. It would be advisable for you to document the gift in a legal document viz. a gift deed and place it in your records. You will need to evaluate if there are any stamp duty implications.

If your taxable income for FY18 exceeded ₹50 lakh, you are required to disclose the value of assets and liabilities held by you as on 31 March 2018. If this reporting is applicable to you, you would need to include the cost at which your grandmother acquired the two floors in the said Schedule. Where such cost is not available and no wealth tax return was filed in respect of such asset by her in the past, the circle rate as on date of gifting the same to you or as on 31 March 2018 can be considered for such reporting.

My wife is a salaried employee and invests in futures. She made a loss of about ₹90,000. For FY18, which income tax return form would she need to use—ITR-2, ITR-3 or ITR-4? Does she require a business audit to be done?

—Name withheld on request

The classification of income/ loss arising from trading in futures and options on a recognized stock in India needs careful evaluation. Such an evaluation will need to be made on the basis of various factors like the frequency of trading, nature of investments, the volume of transactions undertaken by your wife and such other factors. Accordingly, the said income/loss can be taxed either as business income/ loss (non-speculative) or capital gains/ loss.

In case the income/loss arising from trading in futures and options is treated as business income, your wife will need to use ITR-3. Also, a tax audit is required only if the turnover exceeds ₹1 crore. There is a method prescribed by the Institute of Chartered Accountant of India (ICAI) for computing such turnover.

If this income/loss is treated as a capital gain/loss, your wife may use ITR-2. Also, no tax audit would be required in such a case, irrespective of the quantum of turnover.

Source: Trendtalky