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Tax implication for LTCG on husband's gift to wife

Indian laws mandate the payment of tax on any gains accrued through the sale of capital assets. Depending on the period of holding, the tax can either be long term or short-term.

  • Sale of capital assets held for over 36 months attracts long term capital gains tax.
  • The duration to qualify for long-term capital gains tax is 24 months in the case of immovable assets like house or property.
  • The long term capital gains tax on various assets ranges from 10%-20% with the benefit of indexation available for some assets.
Husband’s Gift to Wife

Gifts and long-term capital gains are governed by separate sections of the Indian tax laws. As per Section 52 (2) (v) of the Income Tax Act, 1961, gifts over a specific valuation are to be taxed in the hands of the recipient. However, no tax liabilities arise if the gift, which includes money and property, is received from a relative under certain circumstances like marriage or inheritance

As per the laws governing gifts, a gift from the husband to the wife should be tax-exempted. But are gifts from a husband to a wife free from long term capital gains tax?
There are two parts to gifting—the transfer of the asset as a gift and the following sale of the asset.

The transfer of assets as a gift to your spouse will not attract any taxes. But tax liability arises depending on the utilisation of the gift.

  • The gift is in the form of money, and your wife invests the amount in shares or bonds. Any gains arising out of such investment will be clubbed with your income as per Section 64 of the Income Tax Laws and taxed accordingly.
  • If the gift is in the form of capital assets, any income arising out of the sale of the asset will attract capital gains tax.

For the computation of long term capital gains, the cost of acquisition and period of holding has to be determined.

  • As per the tax laws, the price at which you purchased the asset before gifting it to your wife would be considered as the purchase price of the asset.
  • The period holding will be calculated from the time you bought the asset to determine the long term capital gains implications. 

In a nutshell, a gift from husband to his wife may not attract income tax, but any income arising out of the sale of the gift will attract long-term capital gains tax

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