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I have tax free interest bonds in my demat account. I want to transfer the bonds to my minor son Tanaksh's Demat account. This is off-market transfer initiated by me. After that the tax free interest will be credited to his bank account. Tanaksh will pay me for the bonds from the his own funds, the same amount as I paid, for purchasing these bonds from company directly. Please let me know if this is ok. Any implications? Similarly for HUF. HUF has tax free interest bonds in HUF demat account. Tanaksh is member of this HUF. can he buy the bonds from HUF ?
Replies (1)
As your minor son paid your purchase cost, there will be no tax liability on this transaction. Generally Bonds don't attract indexation hence gain/loss arising from the above transaction will be nill provided your son paid you both acquisition cost and Brokerage paid if any. Secondly as you son is minor, Interest earned by your son in to bank account will be clubbed in your Returned income and you can claim Rs.1500 exemption. Generally if all of your transactions are made at arms length transaction no tax implications will arise hence transfer to Member H.U.F at adequate transactions will not attract clubbing provisions.
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