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Clarifications for taxation issues!

Tax queries 693 views 8 replies

I have permitted my daughter to use Naval Rungta HuF's trading account for investment and trading purpose as she can't trade in her own account due to restrictions by the corporate where her husband is employed. She is liable for income tax returns etc.

Now she is in need of 50 lacs which can be done by transferring her long term holdings of shares in her own account to HuF account and sale them off.

Please guide what will be taxes and ways to minimise it.

TIA

 

Replies (8)
Quick Summary
Query on tax implications of transferring shares and routing investment through HUF/daughter�s account. Experts suggest avoiding indirect routing. Sale from owner�s account attracts LTCG tax. Transfers may trigger clubbing provisions. Better option is direct sale, pay tax, or use HUF loan structure with interest.

The safest approach is to avoid using the husband’s trading account informally for the wife’s investments. If the shares belong to the wife, sale should ideally be made from her own demat/trading account, or through a properly documented off-market transfer/gift/sale route.

If she gifts the shares to her husband, the gift itself may not attract tax, but any capital gains on subsequent sale can be clubbed back in the wife’s hands under section 64, since the asset was transferred to spouse without adequate consideration. Therefore, this may not minimise tax.

If the husband purchases the shares from her for fair market value, the wife will have capital gains at that stage itself.

Therefore, tax cannot be avoided merely by routing the shares through the husband’s account. Compute LTCG in the wife’s hands and use legitimate planning such as timing of sale, available LTCG exemption threshold, set-off of capital losses, and spreading sale across financial years where commercially possible.

Preferable approach would be sell the shares in her own account & pay liable capital gains (check for long term holding period before sell).

Transfer the required anount to HUF account as loan and trade in HUF account independently.

@ Dhirajlal Rambhia

Dhirajlal ji

Namaskar.

Great to see you back in this forum and really glad.

I was getting worried about your well being.

Hare Krishna 

With the grace of GOD I am fine...

I prefer to reply whenever I feel to be utmost necessary..

Hare Krishna...

Dhirajji,

Thanks for your clarification. We are obliged.

I totally agree with Dhiraj Sir.

 

Also additional suggestion could be to charge interest on loan given to HUF.

I totally agree with Dhiraj Sir.

 

Also additional suggestion could be to charge interest on loan given to HUF.

I totally agree with Dhiraj Sir.

 

Also additional suggestion could be to charge interest on loan given to HUF.


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