Q. A & B are Brothers married and staying in joint family.Each of them are separately assessed for Income tax. B sales shares worth 1 cr paying STT which he had baught before more than 3 years. B invests this amount equally in 4 names i.e A Plus A`s wife, B & B`s Wife 25 Lakhs each in Mutual Funds.Can you please advise the tax Implecation and also we should make a Gift Deed for this or show as a loan to others.Please advise in detail.
Answer :- Dear friend, From ur query, it seems u had directly invested the amount of 25L for each person as mentioned by U, from ur own bank account. This `ll be treated as cash gift.If u had first invested all the 75L Rs. (for other 3 members), under ur name & later gifted the alloted units to ur family members, then it w`d be a gift in kind.
U`ll ask, what`s the difference in this?
In case of gift – For ur Brother A & his wife, the income from such MF investments, `ll be taxable in their own hands, but in ur wife`s case, if the income from these MFs is taxable (if the gains r STCG from Eq. MFs or the MFs r debt oriented), it `ll be clubbed with ur income under the clubbing provisions of Section 64. For ur own 25L Rs. the income generated by MFs `ll be taxable in ur hands if it is taxable at all.In case u want to show the 25L rs. to all other 3 persons as loan, in this case, the interest received (if any) from these 3 `ll be taxable in ur hands & the income from these MFs `ll be taxable in the hands of the respective owners. In this case, even ur wife`s investment `ll be taxable in her hands & clubbing provisions of section 64, `ll not be applicable as it was not a cash gift. Instead it was a loan & u r paying Tax on ut interest income.
I hope the above info is useful for u. Plz. feel free to ask, if u need more help.