Personal finance: You ask, we answer

Naveen Dhawan asks:
I am holding some shares and I want to gift them to my mother. Can I do so? What will be the tax implications if the price at which I bought the shares is considered as the price at which my mother purchased the shares?

Homi Mistry, Partner at Deloitte Haskins & Sells, replies:
Yes, you can gift shares to your mother. Such transfer of shares by way of a gift will not attract any tax. However, in the future when your mother sells / transfers such shares, in calculating the capital gains taxable in your mother's hands, the cost of acquisition will be taken to be the cost at which you had purchased such shares and the period of holding of the shares will be taken to be the aggregate of the period that you, as well as your mother, held the shares. Currently, sale of listed shares held for more than one year on which Securities Transaction Tax (STT) is paid is exempt from capital gains tax.

A Venkata Subramanian asks:
At the time of quitting a company, my son had to pay 2 months' salary and this was not shown as deduction in Form 16. His new employer reimbursed that amount (buyout). Will the reimbursed amount be taxable? Or, will it be treated as reimbursement of expenses incurred (like reimbursement of tour expenses) and not be taxable as it isn't income and there is no gain? Alternatively, while filing tax returns, can we deduct the notice pay from the salary received from the previous employer and include the reimbursement as salary received from the new employer to pay tax on it? Please also mention relevant sections of Income Tax Act as well as case laws which can be used as reference in such cases.

 

Homi Mistry, Partner at Deloitte Haskins & Sells, replies:
The notice pay reimbursed to your son by his new employer will be taxable in his hands as profits in lieu of salary (Section 17(3)(iii)). No deduction can be claimed in respect of the notice pay paid to the earlier employer since there is no provision in the Income Tax Act to deduct the notice pay from the taxable salary.