Tax Column

I am an individual and received a donation/grant of Rs. 2 lakh during FY2018-19 from a charitable trust approved under the Income Tax Act. Is there any tax implications in my hand?

Jayesh Dadia
Chartered Accountant


Under Section 56(2)(x) the Income Tax Act, any amount received in excess of Rs. 50,000 is taxable in the hands of recipient. However, there are some exceptions given in the said provision, such as amount received from relatives on inheritance and from any charitable trust,etc. It seems you have received Rs2 lakh from a charitable trust which is approved under section 12A/12AA of the Income Tax Act and, therefore, Rs2 lakh is not taxable in your hand in view of the specific provision mentioned in Section 56(2)(x) of the Income Tax Act. However, you must obtain a confirmation from the charitable trust, along with certificate under section 12A/12AA of the Income Tax Act for your records.

I have sold shares of unlisted company during FY2017-18 and made long term capital gain of Rs. 2 crore. I have invested the entire Rs2 crore in a new residential house in December 2018 and filedreturn of income for the assessment year 2018-19 on January 31, 2019. I was told that since Ihave not utilised the entire capital gain before the due date of filing the return, i.e. July 31, 2018 and also not deposited the entire capital gain in the specified capital gain scheme, I may lose the exemption under section 54F of the Income Tax Act even though I have utilised the capital gain before filing the return in December, 2018. Kindly advise whether I will get benefit of Section 54F of the Act?

From your question, it is very clear that the due date of filing the return under section 139(1) was July 31, 2018. Under the provision of the Act, a return can be filed belatedly under section 139(4) of the Income Tax Act.The due date of filing the return under section 139(4) wasMarch 31, 2019. You have utilised the entire capital gain on December 31, 2018, i.e., within the permissible time for filing the belated return under section 139(4) of the Income Tax Act. The Bombay High Court in the case of HumayunSuleman Merchant (387 ITR 421) has clearly held that the due date of filing the return should be the date of filing the return mentioned under section 139(4) of the Income Tax Act and cannot be restricted to section 139(1) of the Act.

You have utilized the entire long term capital gain in December 2018 and filed the return in January 2019. Both these dates fall within the permissible time mentioned under section 139(4) of theAct. Therefore, in my opinion, the Assessing Officer (AO) cannot deny exemption under Section 54F of the Act. If the AO denies the exemption, then you have a fair chance of succeeding in appeal.

I am aresident Indian. During FY2018- 19, one of my friends (not relative), who is a foreign citizen, died. To my surprise, he has mademe one of the beneficiaries of his estate. According to the foreign attorney, the estimated market value of my share in the property situated abroad comes to Rs. 2 crore. Since the property is going to be held jointly with other beneficiaries, the attorney has decided to sell the property and send my share by way of remittance to my bank account. I just want to know is there any tax implication as I was told that inheritance of assets is not subject to tax? Further, whether assetsituated abroad makes any difference?

If you receive any property/asset by way of inheritance, then the value of such asset/property is not taxable in your hand even if it is situated aboard. As such, the fair market value of your share in real estate as one of the beneficiaries on inheritance is not taxable in India, provided you file proper documents in support of your claim. However, since the property is going to be disposed off by the foreign attorney and you are going to get the sale consideration of that property in India, then the said sale consideration would be subject to capital gain tax in India as the sale consideration is not by way of inheritance.Anyhow, you will be entitled to the benefit of indexation cost to the previous owner as deduction from the sale price. Further, the asset would be considered as long term asset, and on sale, the surplus would be considered as long term capital gain, which is subject to tax @ 20%, plus surcharge in India. If you do not have more than one residential house in India, then you can invest the long term capital gain in an another residential house in India and your entire capital gain would be exempted under section 54F of the Income Tax Act.

I am an individual having business income of Rs12 lakh per annum. I am also engaged in the agricultural activities and earn Rs. 5 lakh as agricultural income annually. I was told that agricultural income is exempted under the Income Tax Act and not to be linked with my other income. Kindly explain.

Yes; you are right. The agricultural income is exempted under section 10(1) of the Income Tax Act. However, since you are having business income of Rs. 12 lakh p.a., therefore,for the purpose of calculating effective rate of tax, the agricultural income initially need to be clubbed and then the tax on agricultural income would be reduced to arrive at the effective tax rate. For your immediate perusal, the calculations of agricultural income is given below: