Hi friends... Kindly clear my doubt...
An NRI husband intends to gift money to his NRI housewife. The wife wants to purchase a house property in India out of such money.My questions are as under::
1) Can the above act by the husband considered as gift ?? 2) Will the income derived from letting out the property be clubbed in the hands of the husband u/s 64??
Please help me. Thanks in advance
The transaction is gift to a 'relative'.
Income from letting the property will be clubbed with the husband's income.
Yes, Sir is right
I am unable to post anything, so i am attaching in word
First of all, the transfer of cash is not taxable - due to various reasons - That is agreed.
Now, with that cash the wife buys an house and lets it for Rent?
1. The Income is not transferred to Husband under 27, as he has not transferred the House in question - Hence, deemed in not applicable here.
2. Now, come to 64(iv) which uses the words, subject tp provision of 27, income from any asset transferred directly or indirectly will be clubbed in the hands of the transferror, unless for aa adequte consideration or for an agreement to live apart. (Not an exact reproduction)
The words directly or indirectly does not represent the Income part, but the transfer part. Meaning, this section is applicable, if Mr.A transfer an asset to B and who in turn transfers to Mrs.A. This is directly or indirectly meaning.
I will try this example. If Mr.A transferred a FD indirectly to Mrs.A, ie thorugh somebody, then the interest from FD is clubbable. However, if Mrs.A cancells the FD and uses the cash to buy debentures, then the interest from debentures cannot be clubbed because this income is not from the asset which was transferred.
In your case, applying the above logic, the Income was derived from the House, which was neither transferred directly or indirectly. Hence, income from the same is not clubbable. Please do give some alternative to this so we can all learn.
Hope i am clear
Shiva
yes income from H.P. is very much clubbed with husband...........there is no doubt..........the only thing is that the cash gift is not taxable in the hands of wife at the time of receipt of gift..............but cash is also very much assets..........so there is no doubt......nd income frm H.P. is clubbed in the hands of husband.......it is just like that one assets is converted into another assets......the only logic behind this question is that cash is an assets or not??????
cash is covered in assets.......so income will be clubbed
if u think i m right then plz appreciate me...
| Originally posted by :Lalit aggarwal | ||
| " | yes income from H.P. is very much clubbed with husband...........there is no doubt..........the only thing is that the cash gift is not taxable in the hands of wife at the time of receipt of gift..............but cash is also very much assets..........so there is no doubt......nd income frm H.P. is clubbed in the hands of husband.......it is just like that one assets is converted into another assets......the only logic behind this question is that cash is an assets or not?????? cash is covered in assets.......so income will be clubbed if u think i m right then plz appreciate me... |
" |
Agree with Lalit.
I think 'Cash' will be an asset for the purpose of sec 64 and hence the income from house property, if any, will be clubbed in the hands of husband.
Gift is not taxable and income from house property will be clubbed in the hands of husband.
| Originally posted by :Sunali | ||
| " |
t cash is also very much assets..........so there is no doubt......nd income frm H.P. is clubbed in the hands of husband.......it is just like that one assets is converted into another assets......the only logic behind this question is that cash is an assets or not?????? |
" |
Yes, cash is also an asset for 64. Now the question is the income of rent is an income from cash???. No it is an income from the House and the house was not transferred. There is a finer distinction. I hope i am clear. Hence, as stated above this RENT will NOT be clubbed.
Shiva
I do think shiva is right. I mean indirect income from such transferred asset cant be clubbed..So if a FD is transferred and its interest is reinvested and interest from such reinvested interest cant be clubbed.Isnt that what u mean sir...applying that logic the house property income cant be clubbed
Section 64(1)(iv) speaks of income from assets transferred "directly or indirectly". it is an indirect way of transfer. i.e. instead of purchasing the property, the husband has gifted cash to the wife who in turn has purchased the property.
| Originally posted by :ca. aravinda krishna | ||
| " | Section 64(1)(iv) speaks of income from assets transferred "directly or indirectly". it is an indirect way of transfer. i.e. instead of purchasing the property, the husband has gifted cash to the wife who in turn has purchased the property. | " |
I accept your logic. Asset should be transferred directly or indirectly. Therefore shall we break it down into two conditions??. Where both should be satisfied.
Condition 1: There should of transfer of an asset either directly or indirectly
Condition 2 : Income should be from the ASSET SO TRANSFERRED.
In this case, cash was transferred. and the income is indirecly from that cash, but, but, but, It is NOT from the asset transferred (i.e., cash in this case)
I am getting your point that, the house was indirectly transferred. In the first place, Where was asset (house) with the husband to be transferred to his wife??. Can you please counter this point so that, we can all really learn. We learn when there are alternative viewpoints. Please convince me.
I think Hareesh has got a hang of that.
Shiva
| Originally posted by :Shiva Kumar | ||
| " | Originally posted by :ca. aravinda krishna " Section 64(1)(iv) speaks of income from assets transferred "directly or indirectly". it is an indirect way of transfer. i.e. instead of purchasing the property, the husband has gifted cash to the wife who in turn has purchased the property. " I accept your logic. Asset should be transferred directly or indirectly. Therefore shall we break it down into two conditions??. Where both should be satisfied. Condition 1: There should of transfer of an asset either directly or indirectly Condition 2 : Income should be from the ASSET SO TRANSFERRED. In this case, cash was transferred. and the income is indirecly from that cash, but, but, but, It is NOT from the asset transferred (i.e., cash in this case) I am getting your point that, the house was indirectly transferred. In the first place, Where was asset (house) with the husband to be transferred to his wife??. Can you please counter this point so that, we can all really learn. We learn when there are alternative viewpoints. Please convince me. I think Hareesh has got a hang of that. Shiva |
" |
I think Sir Arvinda is right,
The case is that the form of an asset has been changed i.e. cash has been replaced for house..so any income from the respective asset will be clubbed. However, if the rental income is further invested into..say, FDRs, the interest income won't be clubbed since it won't arise out of the actual asset transferred.
I hope its clear..
Dear Aravinda sir,
I think income earned out of investing the clubbed income is not clubbed BUT that earned from converting the clubbed income continues to be clubbed...
I agree that if cash received is put into a FD its interest will be clubbed as cash is converted here to FD.
But please make it clear whether this buying of house property is conversion or investing. I guess that will make the entire doubt clear
CAclubindia
