Who will pay capital gains tax if my wife transfers shares to me through an off-market transaction?

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My wife intends to transfer shares from her demat account to mine via off-market mode at the price she bought them in the market. What will be the tax implications? If I sell these shares, who will pay the capital gains tax?


Amit Maheshwari, Partner, AKM Global responds, “If the shares are traded at a price higher than the cost price, the tax authorities may deduce that the shares are transferred at an insufficient price and the income from these shares would be considered income in the hands of your spouse even if you continue to be held Therefore, when selling shares, the income/loss, if any, would be associated with your wife’s income.However, this can also lead to some ambiguity.Normally, selling listed shares would lead to a preferential tax rate of 10% (long term) and 15% (short term) but one of the conditions is that at the time of purchase the Securities Transaction Tax (STT) has been paid. are the transferor, and you did not purchase the shares in the market by paying STT and therefore the lower rate of tax on listed shares should not be allowed to you.Alternatively, your wife may offer you these shares because that would not be attractive er such ambiguity s.”

My wife and I each earn Rs 2.25 lakh per month and have investments in FDs, stocks and mutual funds. We are selling an apartment for Rs 50 lakh, bought jointly for Rs 11 lakh in 2003. I will also receive Rs 30 lakh from my deceased father’s savings and investments. I do not need these funds immediately. My daughter will need Rs 40-50 lakh for study abroad in three years. She has savings, PPF and demat accounts. How should I invest this corpus to minimize my tax expenses?

Naveen Kukreja, CEO and Co-Founder, Paisabazaar.com responds, “Long-term capital gains from the sale of immovable property attract LTCG tax at 20% after indexation. In your case, the LTCG tax liability would be around Rs 18 lakh. To save your tax payable, invest your indexed earnings in Section 54EC-specified bonds issued by NHAI, PFC, REC and IRFC within six months of the sale of the property.These bonds have a lock-up period of 5 years and offer interest of 5%.Invest the non-LTCG component of the proceeds from the sale of your property together with the fixed amount income component of your father’s corpus in bank FDs offering interest rates of 6% and above.If this corpus is insufficient to constitute your daughter’s education corpus, also invest part of your monthly investable surplus in high yield bank FDs to cover the shortfall Some of the scheduled banks offering such yields include SBM Bank, Utkarsh Ba nk, Jana Bank, Suryoday Bank, Ujjivan Bank and ESAF Bank. Try to distribute your FD in at least two of these banks. Also opt for 1-2 year FD terms, with no auto-renewal option, as the rising interest rate plan will give you the option to renew your FDs at higher interest rates. The rest of your monthly surplus can be invested in the direct plans of HDFC Index Sensex, Mirae Asset Large Cap or Axis Bluechip, Axis Midcap or PGIM India Midcap Opportunities and Parag Parikh Flexi Cap or PGIM India Flexi Cap Fund in equal shares via SIPs . Invest in the direct plans of Axis Long Term Equity and/or Mirae Asset Tax Saver Fund through SIP to claim a tax deduction under Section 80C.”

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