Tax Queries answered by Dilip Lakhani, Senior Chartered Accountant

I hold equity shares, which if sold would fetch Rs 60 lakh. What will be the long-term capital gain & tax on the shares, which I bought for Rs 10/ share in 1975-1980? If I gift the entire amount to my son (an NRI), do I have to pay any gift tax? Should I deposit the entire amount by way of cheque into his NRE account? Alternatively, is there any tax implication if I deposit the amount to my wife’s account? Since my son and wife are thinking of jointly buying a flat, should I pay the amount directly to the developer? —VH Mulwad

You have not mentioned whether the equity shares are listed or unlisted. If the listed shares are sold on recognised stock exchange and STT is paid then the long-term capital gains will be exempt u/s 10(38) of IT Act, 1961. If the shares are unlisted, the resulting long term capital gains are chargeable to tax @ 20% with benefit of indexation. If you give any money to your son or wife by way of gift, neither you nor the recipient will have to pay any tax. Your wife or son may then utilise these funds for buying a flat. It is advisable that you should not pay the amount directly to the developer in the name of your son or wife. The gift to your son, who is a non-resident Indian will be subject to the applicable provisions of FEMA. In one fiscal, you can gift to your son only up to $250,000. This amount cannot be deposited into his NRE account, but will have to be deposited in his NRO account in India.


I am a salaried individual and want to transfer money to the accounts of my children — one of whom is a major. I want to invest this money in a private investment company for monthly/yearly return basis. What would be tax liability on the returns? —Abdul Rahiman Sudi

The interest earned from investment in private company will be taxable in the hands of the investor. If you give any money to your children by way of gift, neither you nor the recipients will have to pay any tax. The interest earned by the minor child from the amount gifted by you will be chargeable to tax in your hands as per the provisions of Section 64(1A) of IT Act, 1961.

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