My mother has just passed away. We found some gold ornaments in her bank locker. She was not a taxpayer. Will I face any problem if I sell the gold and deposit the cash in my account?
Answer: The answer to this will depend on the evaluation of various factors. What is the total value of the gold jewellery found in your mother’s locker? Was this any inheritance received by her? Was your father a taxpayer? If so, what income had he declared in his income tax return (ITR)? What was her age at the time of her death? Even if she was not a taxpayer, did she have any other income, and so on?
You will not face any problem if the value of the gold jewellery found in her locker is of reasonable value. However, what is reasonable will depend on the consideration of all the above factors taken together. So, if the gold jewellery was genuinely found in her locker and it can be reasonably proved that she might have accumulated and/or acquired it during her lifetime, you are unlikely to face any problem.
However, if you are not able to convince the assessing officer about feasibility of your mother having accumulated that much gold jewellery during her lifetime, you are likely to face tax at 60 per cent plus interest and may also face penalty proceedings.
I wish to make a gift of Rs. 1 lakh to my nephew. What will the tax treatment of this gift for me as well as my nephew?
Answer: The donor does not have any tax for gifts made by him irrespective to whom such gifts are made, but the recipients of such gifts have to pay tax if the aggregate value of such gifts during a financial year exceed Rs. 50,000. However, there are certain exemptions to this rule. One such exceptions is gifts received from certain specified relatives, including uncles and aunts.
So, the transaction of gift made by you to your nephew will not have any tax implication either for you or your nephew.
However, this rule does not work both ways. Under Section 56(2), a nephew is not covered under the definition of specified relatives for the uncle or the aunt. Therefore, any gift that you receive from your nephew will not be tax-free in your hand.
I had bought a single premium policy. The insurance company has deducted tax at the time of maturity. Will the entire maturity amount be considered taxable or will only the premium paid by me deducted from the maturity amount and the balance deemed taxable?
Answer: Under Section 194AD, tax is required to be deducted only on the income component comprised in the money paid by the life insurance company in respect of an insurance policy. The entire maturity proceeds cannot be taxed. Only the difference between the premium paid and money received can be taxed.
Also, an insurance policy can be treated as a capital asset and the same can be logically inferred by taxation provisions of Section 112A in respect of unit-linked insurance plan (Ulip), where the premium paid exceeds Rs. 2.50 lakh during a year. So, you can avail of benefit of indexation on the premiums paid on such policy three years after paying the premium.
The author is a tax and investment expert