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Immovable property received from a relative is not income

Depending on the period of holding the same would be taxed

Q. I plan to send MONEY to my family in India. Is there a limit on how much I can send as gift? How will it be taxed?

Expert Comment: As per Regulation 6 of the Foreign Exchange Management (Export and Import of CURRENCY) Regulations, 2000, you are permitted to send foreign exchange to India without any limit in any form other than currency notes, bank notes and travellers cheques.

From a tax perspective, where any individual receives MONEY in excess of Rs.50,000 in any FINANCIAL year without any consideration, it will be taxed as “income from other sources” in the hands of the recipient. But this rule does not apply to MONEY received by a relative (which includes spouse, brother, sister, brother or sister of the spouse, brother or sister of either of the parents, any lineal ascendant or descendant of yourself or your spouse).

Accordingly, money sent as gift to your family being relatives as defined above, would not be taxable in India.

Q. I have inherited a flat from my great aunt through a Will in the UK. Now I want to sell it. What would be the tax implications in India considering I have not paid or INVESTED any money. I am an Indian resident. What type of tax will be applicable and on what amount, from the day the property was transferred to me or from the day that my great aunt acquired it?

Expert Comment: Gains arising from the sale of capital asset (house property) located in India or abroad by a tax resident of India would be subject to tax in India. Depending on the period of holding the same would be taxed either as long-term capital gain (LTCG), or as short-term capital gain (STCG).

Taxable gain from sale of a building is computed by deducting the cost of acquisition and cost of improvement, expenditure incurred wholly and exclusively in connection with the transfer from the sale consideration. In your case, since the apartment was received through inheritance, the cost of acquisition of the asset shall be deemed to be the cost at which your aunt acquired it as increased by the cost of any improvement incurred either by you or your aunt.

If the building has been held for more than 36 months prior to its sale, the capital gain arising would be taxable as LTCG at the rate of 20% (plus applicable surcharge and education cess). If it is held for less than 36 months, the capital gains would be taxable as STCG at the rate of 30% (plus surcharge and education cess).

You will not be liable to pay tax on receipt of the property from your great aunt as any immovable property received without consideration from a relative is not treated as income.

‘Relative’ has been defined to include brother or sister of either of the parent of the individual receiving the immovable property.

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