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Remember that income from accumulated income is outside the purview of Section 64!

      In the context of the clubbing provisions under Section 64 of the Income-tax Act and Section 4 of the Wealth-tax act, it is important to note that the income liable for clubbing is such income arising from the amount of the gifted asset and the wealth liable for clubbing is such wealth representing the amount of the gifted asset. If the transferee continues to accumulate the income arising from the gifted asset and further income is generated from such accumulated income, such further income is not liable for clubbing under Section 64. Similarly for purposes of wealth-tax, such accretions to be gifted asset are also not liable for clubbing. (more…)


Gifts to Son’s Wife on the occasion of Marriage can help save smart tax for a lifetime!

      The abolition of Gift-tax since 1st October, 1998 has also thrown open several opportunities for planning to reduce a taxpayer’s income-tax and wealth-tax liabilities. Moreover even under the provisions of Section 56(2) as effective from 1st September, 2004 (and further amended w.e.f. 1st April, 2006 and 1st October, 2009), seeking to treat gifts exceeding Rs.50,000 as income, gifts made to ‘a relative’ have been duly exempted.

      However the ‘clubbing provisions’ under both the Income-tax and Wealth-tax Acts, seek to guard against tax-avoidance through the route of gifts to close members of the family such as spouse and son’s wife. (more…)


Clubbing of income is not attracted where remuneration is paid to spouse possessing professional or technical qualifications!

        Keeping in view the family system prevailing in India where the financial affairs of the family are generally managed and controlled by the male head of the family, it is common to come across situations where the husband plans deriving income in the hands of his wife, thus aiming to reduce his income-tax tax liability. (more…)


Deeming fiction u/s. 50 for taxing short term capital gains cannot deny benefit of exemption or set off of loss!

      Section 50 of the Income-tax Act prescribes a special provision for computation of capital gains arising on the transfer of depreciable assets. As per the same, where the consideration received or accruing on the transfer of such an asset exceeds the written down value of the block of assets to which such an asset belongs, the excess is deemed to be capital gains arising from the transfer of short term capital assets.

      Whereas various exemptions, such as under Sections 54, 54EC and 54F can be enjoyed in respect of long term capital gains (LTCG), the benefit of such exemptions is not available in respect of short term capital gains (STCG). Moreover, while taxable LTCG is liable to tax at a concessional rate of 20.6%, no such concession is allowed for STCG, which is taxed at normal rates that can scale upto as high as 30.9% or even 32.445% (where surcharge is attracted). (more…)


Contributions & Donations to approved Charities & Research Institutions qualify for deductions from 50% to 175% !

Section 80G of the Income-tax Act provides for deduction out of gross total income in respect of donations to approved Funds and Charitable Institutions. The benefit of this deduction and consequential tax saving is available to any taxpayer viz. individual, HUF, company, firm, etc., whether resident or non-resident. (more…)

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