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Tax: Query corner
December, 22nd 2009

Our expert helps you understand the complexities of tax in this weekly column. Email to etquerytax@

I have invested Rs 3 lakh in Post Office Monthly Income Scheme. It is maturing on December 27 with 10% bonus. Will this amount of bonus be taxed as long-term gains (since it is being received after 3 years) or as regular income like interest? Will it be taxed at the rate applicable for the financial year ended March 31, 2004 or at the rate applicable for the fiscal ending March 2009?
Manohar Ghodsar

In my view, the income received by way of bonus at the time of maturity of Monthly Income Scheme (MIS) would be taxable as regular income like interest and not as capital gain.

I sold my property which was purchased 6 years ago and the gain was Rs 40 lakh. I had purchased a flat 8 months ago and for this purchase, I had taken a loan of Rs 35 lakh. I would be paying an EMI of Rs 35 lakh for the next 15 years. Since the new investment is through a bank loan, am I still liable for long-term capital gains tax (LTCG)?
Amit T

There are varying judicial decisions on this. However, in my view, using loan funds for the purchase of house will not disqualify you from claiming exemption under section 54 of the Income Tax Act, 1961.

My father left behind a house and a registered will, stating that my brother and I would be the co-owners of the house after his death. Our two sisters are ready to relinquish their portion of ownership of the house in our favour, without using the will document as it could be time consuming. Will relinquishing of the property for the mutation purpose amount to giving gift of their share of the property to us?
AK Vohra

Relinquishing of the property by your sisters for the mutation purpose will not be considered as gift for income-tax purposes.

I have transferred some SBI shares and some Gujarat NRE Coke shares from my demat account to my wifes demat account. But I have not prepared any gift deed and simply transferred them to her demat account. Will the same attract any gift tax?
Ranjit Mukherjee

Note that the Gift Tax Act is no longer applicable. When your wife sells the shares, the capital gains arising on such a sale would be taxable in your hands U/S 64 of the I-T Act, 1961. While computing the capital gain, the cost should be considered as the amount you paid for the purchase of the shares. Similarly, the period of holding should be calculated from the date you purchased the shares. Of course, if the period of holding is more than a year and the shares are sold through a stock exchange, the capital gains arising on such sale would be exempt from tax.

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