GIFT FROM FATHER IS NOT INCOME



A.I made capital gains by selling jewellery. Can I repay the loans I took last year from my daughter for the construction of my own residential house to escape capital gains tax?
--Rajesh Malhotra

Long-term capital gains earned by an individual and a Hin- du united family (HUF) from the sale of any assets, other than a residential house, are exempt from tax if the assessee pur- chases a house a year before the date of sale of such assets under section 54F of the Income-tax Act.

You won't have to pay tax on the capital gains earned on the sale of jewellery in case you purchased the residential house within one year before the sale of such jewellery. You don't necessarily need to repay the loan you took from your daugh- ter to claim this benefit.

B.Can I gift National Savings Certificate (NSC) to my married daughter and claim tax deduction on the same?
--Prakash

Investments in NSC in the name of child does not qualify for deduction under section 80C. So, you will not be able to get any tax relief in respect of the NSC you intend to gift your daughter. However, such a gift will not be treated as income of your daughter under section 56 as gift from father is exempt.

C.I took a home loan in February 2007 and I am claiming tax benefits on the interest as well as the principal part. I plan to sell the house and acquire another house. Will there be any tax implications? Do I need to refund the tax benefits I have al- ready claimed? Do I need to pay capital gains tax?
--Ram

If you transfer a property on loan, on which you have claimed tax deduction (for repayment of the principal portion of the loan), within five years of acquiring it, no deductions will be allowed in the year in which you sell the property.
Moreover, all the deductions allowed under section 80C (for the principal portion of the home loan) in the preceding year or years will be treated as income of the year in which you transfer the property. However, there is no similar provision for deductions allowed on the interest part of the home loan under section 24.

Since you are transferring the property after three years and are planning to buy a new house, you will not have to pay any tax on capital gains from the house you plan to sell if the gains are less than the cost of your new house.

source:livemint