In today’s Ask Wallet-wise query, an NRI seeks clarity on filing returns for short-term capital gains from a Portfolio Investment Scheme (PIS) and the implications of transferring money to a resident spouse for stock investments. Our expert addresses key concerns: which ITR form to use, how capital gains for NRIs are taxed (including recent changes in tax rates), and whether gifting funds to a spouse creates any tax issues. Understanding these rules helps ensure your investment journey remains smooth and compliant.
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I am an NRI. I have opened a PIS and a Demat account in my name, as well as a normal resident Demat account in my spouse’s name, who is a resident. I have transferred some money from my NRO account to my wife’s account and used this amount to purchase stocks through her resident Demat account. I earned Short-Term Capital Gains (STCG) of around Rs 30,000 in the last financial year . Although the amount is small, I would like to file an ITR. Kindly advise me on how I should file my ITR. I am also doing SIPs in stocks in her name. Are there any issues regarding the funds I transfer monthly to her account considering my NRI status?
Expert Advice: As you have short-term capital gains, you are required to file ITR-2. As the short-term capital gains arose from listed equity shares and you are a non-resident, you are not entitled to set these off against any shortfall in the basic exemption limit of Rs 2.5 lakh. You will need to pay tax at 15% on the entire STCG unless tax has already been deducted at source, which is likely since brokers are required to deduct tax at source on capital gains earned by non-resident investors. For STCG earned on or after July 23, 2024, a higher tax rate of 20% will apply.
Transferring money from your account to your wife’s bank account does not conflict with your NRI status. As per current tax laws, if the aggregate value of all gifts received during a year exceeds Rs 50,000, the same is treated as income in the recipient’s hands. However, gifts received from specified relatives, including spouse, are not considered income, regardless of the amount.
The amount transferred to your wife’s account may be treated as either a gift or a loan, depending on whether repayment is intended. If it is a gift, any income your wife earns from such gifted money must be clubbed with your income as long as the marriage subsists. The clubbing provisions continue to apply even if the asset is subsequently converted into another form. However, these provisions apply only to income earned on the amount gifted, not on income from investments made out of the already clubbed income.
Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions
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