Tax Column

I am an individual and I own various paintings which I had acquired almost 20 years back and always treated them as personal assets. If I sell these paintings, these would fetch Rs 2 crore. I am planning to sell these paintings. Could you please explain what are the tax implications? 

Jayesh Dadia 
Chartered Accountant 

Under the current income tax laws, even if paintings are shown as personal effects in your books, they still come under the definition of capital asset under the Income Tax Act. As such, sale of any capital asset is subject to capital gain tax. Since you are holding these paintings for more than 20 years, these are long term assets. If you can establish that you have incurred cost in acquiring these paintings, then you will be entitled to deduction of indexed cost from the sale consideration of Rs 2 crore and you would be required to pay 20% Long Term Capital Gain (LTCG) on the balance amount. But if you fail to establish the cost, then the entire Rs 2 crore would be taxed as LTCG. However, if you do not own more than one house, then the entire capital can be invested in residential premises to avail tax exemption. 

I am an individual. I am taking care of my neighbour who is not related to me. Out of love and affection for me and in appreciation of my care and concern for them, they have given me a new car having market value of Rs 14 lakh as a gift. The car is also registered in my name, but the payment has been fully made by my neighbour. Is there any tax implication in my hand? 

In short, you have received gift of a car from your neighbour out of love and affection for you. The gift is not an income but it is a capital receipt. However, there are the provisions in the Income Tax Act to tax certain gifts received from a non-relative.

Under Section 56(2)(vii) of the Income Tax Act, certain properties received as gift are taxable in the hands of recipients. The definition of properties has been given in Explanation (d) to Section 56(2) (vii) of the Income Tax Act. The motor car does not come under the definition of property. Moreover,if you are using the motor car for your personal purpose and treating it as a personal asset, then it does not come under the definition of capital asset as defined in Section 2(14) of the Income Tax Act. 

Therefore, in my opinion, there will be no tax implications on receipt of the motor car as a personal asset in your hand. However, you have to obtain a confirmation letter or a gift deed from your neighbour stating the fact regarding the gift of motor car to you and the neighbour should prove his capacity and capability to give such gift. The Tax Officer may raise an issue, but I am sure that you will get a favourable decision from the Appellate Authorities. 

I am a Non-Resident Indian (NRI) working in the UAE since last 20 years. Now I am planning to return and settle in India. Over a period of 20 years, I have savings of Rs 10 crore. I want to bring all my wealth to India which will enable me to purchase a residential house for me. Can you let me know if there is any tax implication involved on transfer of funds from Dubai to India? What paperwork amI supposed to do and what are the compliances required to be completed on my part? 

If you have earned your entire Rs 10 crore when you were an NRI and the sum is the accumulation of saving over a period of years, then the transfer of such funds to your account in India will not attract any tax. Kindly ensure that you remit the funds through proper banking channels and not through money transfer agents. Also, obtain the Foreign Inward Remittance Certificate from your Indian bank which should clearly disclose your name as a remitter as well as beneficiary. If you follow this process, you will not be subject to any tax on the transfer of funds. However, on inquiry by the Tax Officer, you may have to explain to his satisfaction that the entire funds which you have transferred from your account were earned outside India. 

I am a lady having 10-year-old son. My divorce petition is pending in a Family Court and it is likely to be disposed-off soon. As per the terms, my husband is ready to pay a one-time of lump sum amount of Rs 1 crore as alimony and monthly maintenance of Rs 1,00,000 per month for the next five years. Is the entire amount taxable or is there any other option which I can avail? 

It is a settled law that alimony received in the form of one-time lump sum amount, as per the court order or decree, is not taxable, as it is a capital receipt in your hand. However, any alimony received by way of monthly instalment be taxable in your hand as ‘Income from Other Sources’. 

However, if you request your husband or the court that the monthly maintenance should be paid in the name of your son towards his education, lodging and boarding expenses, then the same will not be taxable as the amount is received by your son from his father which is exempt under section 56(2)(x) of the Income Tax Act. Accordingly, you should take one-time lump sum amount in your name and the monthly maintenance in your son’s name.