My son lives in the US, while I live in Pune. My son owns two properties in Pune. Can I pay municipal taxes on his behalf for those properties?
—Name withheld on request
I assume that your son is a non-resident as he resides in the US. Under the Foreign Exchange Management Act (FEMA) rules, payments made by a resident on behalf of a non-resident are prohibited unless specifically permitted. Therefore, such payment of tax on behalf of your son would not be allowed under FEMA.
If your child has a non-resident ordinary (NRO) account in India and you hold a power of attorney to operate the account, you can donate an equivalent sum of money to his or her NRO account. As the power of attorney holder, you are allowed to make local payments, including payment of (municipal) taxes in India.
Read also | I retired in February but received my vacation pay in April. When does the exemption benefit apply?
While such a gift would be exempt in India to your son, it would be subject to the Tax Collected at Source (TCS) provisions in your case. If the gift exceeds a sum of ₹7 lakh, TCS will be applicable at the rate of 20% on the amount exceeding ₹7 lakhs.
I live in the US. I invested money in a startup during the Covid period due to its low valuation. Due to a new rule, my shares were recently converted into demat from physical shares. Does conversion of physical shares to demat attract any tax?
—Name withheld on request
In order for income to be taxed as capital gains, it must be the result of the “transfer” of a capital asset. Shares in an unlisted company are certainly considered capital assets. However, a “transfer” occurs among other things when a sale, exchange, surrender of an asset or the extinction of rights over the asset occurs. The conversion of shares from physical to dematerialised form does not involve the sale of shares in a non-listed company, nor their exchange for another asset, nor the surrender of the shares, nor the extinction of rights over the shares. Therefore, this conversion does not constitute a “transfer” of shares and, consequently, does not entail any tax implications.
Harshal Bhuta is a partner at the chartered accounting firm PR Bhuta & Co.
—If you have any questions about personal finance, write to us at [email protected] and our experts will answer you.
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.