I would like to know whether Section 37(i) will be applicable in the case of a company selling a property owned by it to an employee who has been occupying it at:
a) a concessional price, b) at indexed cost of acquisition, c) at the present value of the original procurement cost calculated at an appropriate interest rate. I'm aware that in all cases, the stamp duty applicable will be as per the published rates.
T V Lukose, tvlukose@mucoindia.com

I'm afraid you have not put your question in the correct perspective. First, Section 37 deals with expenditure not being in the nature of capital expenditure. Secondly, I have not heard of anyone selling property at indexed cost. In any case, I do comprehend what you desire to ask and hopefully the answer is: Whenever a property is sold to an employee, the difference between the market price and the price paid by the employee will be taxed as a perquisite in the hands of the employee.

I intend to purchase some real estate like house, office, land etc, in India. Please let me know whether there's any monetary limit or a limit on the number of properties I can buy with repatriation benefit. If there is such a limit, am I allowed to exceed this limit on a non-repatriation basis? What are the various steps I should take to ensure that there are no hassles if and when I decide to sell these properties?
Mufaddal Khumri, MUMBAI

The RBI has granted general permission to NRIs as well as PIOs (Notification FERA 155/93-RB dated September 16, 1993) to acquire by way of purchase or inheritance and dispose of by way of sale, mortgage, lease, gift, settlement or otherwise any number of immovable properties, residential or commercial, situated in India.

The consideration shall be paid out of foreign exchange remitted through normal banking channels or out of the funds held in NRE or FCNR accounts of the NRI. Acquisition of a house or even a commercial property, out of funds held in NRO account of the purchaser or from his rupee funds is possible, but on a non-repatriable bases.

Persons purchasing properties shall submit to the RBI within a period of 90 days of purchase, a declaration in Form IPI-7 along with a certified copy of the document evidencing the transaction and a certificate from a bank in India for having paid the consideration. If such a declaration is not filed within a stipulated time, the repatriation right is lost.

Income accruing by way of rent or sale proceeds of the property or income arising out of investment of such proceeds is credited to the person's NRO account and in the case of PIOs, to his QA-22 account, before the sanction for repatriation is received.

If the property, originally acquired on or after May 26, 1993, through foreign exchange, is sold after three years from the date of acquisition or from the date of payment of final installment, whichever is later, repatriation of the amount equivalent in foreign exchange paid for the acquisition is permissible with the RBI's prior approval (form IPI-8 received within 90 days). The permission for repatriation may be granted for a maximum of two residential properties. It appears that no such restriction is prevalent for commercial properties.

A foreign citizen of whichever origin, resident or otherwise, can purchase a property in India on non-repatriable basis for bona fide residential purpose, with prior permission from RBI (form IPI-1).

If I give a gift of Rs 100,000 to my major daughter who is also earning, is there any tax liability? If so, who will pay the tax and is there any exemption limit to this amount? Can the tax be saved by using any legal strategy?

What about a similar gift to my wife?
sumathi.s.sivaramakrishnan@bellatlantic.com

The Gift Tax Act stands abolished now. There is no gift tax, either donor or donee based, on gifts. There's no clubbing provision in respect of gifts to major children. It is applicable only to minors. All the same, I would like you to avoid giving a gift to your daughters, unless there are some need-based reasons to do so.

Before the GTA was abolished, aggregate gifts over Rs 30,000 in a financial year was taxable at the penal rate of 30 per cent and therefore, it was a wise strategy to give gift up to that limit and build up a corpus for the children (and also spouse). When the child needed a large sum for some specific need such as education or marriage or start up of a business or profession, the money would be readily available. This strategy avoided the need to give a gift of a large sum when needed. Now that you can give need- based gifts as and when it arises, there is no need to build a corpus for your daughter and take the risk of the child running away (and worst, your wife eloping away) with the money.

There was another advantage in giving gifts (note the past tense). The income earned on the gifted corpus by your daughter was and is taxed in her hands. Incidentally, the spouse was and is treated as a minor and the income was and is eligible to be clubbed. The only difference is that in the case of minor children the entire income, with a paltry exemption of Rs 1,500 per child per year, is taxable in your hands whereas in the case of the spouse, the income on gifted corpus can be clubbed. Once you have paid the tax, on this first-stage interest, and if your wife invests the money somewhere, the income thereon was and is not clubbed in your hands.