A resident Indian has investments in ICICI Prudential US Bluechip Equity Fund and Franklin India Feeder Franklin US Opportunities Fund which invest in foreign securities. Should he declare these holdings as ‘foreign assets’ while filing income tax return in form ITR-2?

A Venkat

According to the instructions issued with the ITR-2 form for AY2015-16 (FY2014-15), the Schedule of Foreign Assets is to be filled up by a resident assessee.

Details of all foreign bank accounts, financial interest in any entity, details of immovable property or other assets located outside India are to be reported. Any income generated/derived from that asset should also be reported. In your case, I understand that the individual has invested in Indian rupees in Indian mutual funds (listed on Indian stock exchanges), which have invested in foreign securities. Accordingly, in my view, since no investment is made in foreign exchange, the same need not to be reported in the return form.

Both my sons send ₹2 lakh each as gift for my consumption/savings every year through net banking. I save part of it either in term deposits, recurring deposits or mutual funds and earn some income, which is declared as my income in my returns. My children give an annual declaration regarding the amount gifted during the financial year. Generally, I am not required to pay tax as my total income is below exemption limit. Please let me know whether the gifts themselves have to be declared anywhere in ITRs and whether the income from such investments needs to be clubbed with that of my children.

Indiramani

According to the provisions of income tax law, where any sum of money is received without consideration from any person exceeding ₹50,000, the whole of such sum is chargeable to tax as income from other sources. Such sum, however, is not taxed in certain cases — if any sum of money is received from any relative as defined in the relevant provision which includes children.

In your case, the gift received by you from your sons falls under the definition of gift received from a relative. Hence, the same is not taxable in your hands. Accordingly, it is not required to be reported in your tax return. Further, the income earned by you from investing such gifted money is your income and will, accordingly, be included in computing your taxable income. It will not be clubbed with the income of your children.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

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