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I wish to create a private trust in which my minor granddaughters, who are NRIs, will be the beneficiaries.
Will the amount they receive from the trust be clubbed with their NRI parents’ income for IT purposes, even after the taxes are paid by the trust for the income it receives?
M Palaniswamy
Where the income is taxable and the taxes are paid by the trust, the beneficiaries are not again required to pay tax on such income.
Accordingly, the income received by your minor granddaughters is not taxable. Consequently, the question of clubbing of such income does not arise.
I have made some short-term loss and some speculation loss in 2017 -2018. I know that short-term loss can be carried forward. Can I do the same with speculation loss, too?
Kavindra Salunke
The loss from speculation business can be carried forward for four years immediately succeeding the year in which the loss was incurred.
Such loss can be set off only against income arising from speculation business.
It is important to file the tax return by the due date to avail yourself of the benefit of carry-forward of such losses.
I had purchased 150 shares of Crompton Greaves on October 27, 2014, at ₹184 a piece, and sold them on May 17, 2016, at ₹61 a piece. I mentioned this in the ITR for 2015-16. During this holding period, the consumer electrical business was separated from the said company, and 150 shares of the new entity were allotted me on March 16, 2016, for which I have not paid anything.
I sold the shares of the new entity on August 11, 2017, at ₹215 a piece. While filing the IT return for 2017-18, what buy price should I mention for the shares of the new entity?
Narayan Joshi
We understand that you were allotted 150 shares of Crompton Greaves Consumer Electricals Ltd (CGCEL), consequent to the demerger of Crompton Greaves Ltd (CGL).
As per the tax laws, the cost of acquisition of the shares of the resulting company, i.e. CGCEL, shall be computed by applying the proportion of the net book value of the assets of the demerged undertaking to the networth of the demerged company (CGL) immediately before the demerger.
As per the tax laws, the cost of acquisition of the shares shall be computed based on the net book value of the assets.
For the purpose of determining the costs of acquisition, reliance can be placed on the communication Crompton Greaves had issued to the shareholders.
As per the communication, the cost of acquisition of the shares of CGCEL post-demerger shall be nil.
Hence, the cost of the 150 shares of CGCEL shall be nil.
The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in
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