Taxability of gifts received on marriage

Gifts received on the occasion of one’s marriage is tax-free. When exactly should they be received so as to be eligible for exemption?

Angazha Parameshwari, Namakkal

There must be a proximate connection between the gift and one’s marriage. Such gifts may be received from any one at all. Non-cash gifts are in any case outside the purview of income-tax whether received on the occasion of marriage or on other occasions. The exemption from tax to gifts on occasion of marriage has always tantalized one.

Earlier, when gift tax was payable by the donor, the donor was tantalised into explaining away his gifts as marriage gifts. Now that tax on gifts is payable by the donee, the pull of marriage would be equally irresistible for him/her.

Make-believe marriages are not ruled out, especially if one has a lot at stake. In all fairness to the exchequer therefore one wishes that some solemn conditions were put in like no exemption on gifts received on second and subsequent marriages as well as a monetary limit lest one is tantalised into using marriage as a money laundering device.
Deathbed gifts

Why gifts in contemplation of death are not taxable?

Angazha Parameshwari, Namakkal

As per the Indian Succession Act deathbed gifts are revocable. An emotionally charged person may do things irrationally which he may repent later and seek to renege on. Hence, such gifts are not taxable.
Tax on shares sold

I sold one hundred shares of a company held in a demat account where, in addition, lay another one hundred shares received as bonus three months ago.

The sale was through the stock exchange. How much tax I will have to pay?

Dipu Sundarrajan, Chennai

If you have held the original shares for more than a year before their sale, you don’t have any tax liability because long-term capital gains from sale of shares through a recognised stock exchange in India is completely exempt from tax with the transaction of course being subjected to securities transactions tax (STT).

In the case of shares held in demat form, FIFO (first in first out) is the norm. Hence it would be presumed that the original shares were sold. If, however, you had acquired the original shares during the last twelve months, you will have to pay a 15 per cent tax on short-term capital gain in addition to STT.
Differential voting rights

Tata Motors plans to make a rights issue of shares carrying differential voting rights with every ten shares carrying one vote and every share being entitled to 5 per cent extra dividend vis-À-vis the existing equity shares. Now, will not the market be thrown haywire because of this differential?

K. P. Dasarathy, Vellore

Not at all. The shares with differential voting rights would be listed separately in the stock exchanges. I think for identification and distinctivity, the company has christened these shares as equity shares ‘A’.

In the event, the shares with full voting rights and shares with just 10 per cent voting rights would be traded separately. One expects the former to command slightly higher quotations even in normal times. But should there be jostling for acquiring the company and the inevitable defensive measures unleashed by the incumbent promoters, the difference in the quotations is bound to be exacerbated because takeover is all about voting rights.

S. MURLIDHARAN