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Insurance policies are not gifts to the beneficiaries
Will a life insurance policy proposed by paying a single premium for a term of five years under the Married Women's Property Act (MWP) and thereon attract `clubbing of income' u/s 64 of the I-T Act, when the maturity proceeds reach the wife of the proposer, if there is an income arising out of such maturity proceeds? What about normal policies?
-Chandras.masand@usa.netAs per the ruling in the case, Commissioner of Gift Tax vs Seth Arvind N Mafatlal, premium paid is not a gift to the beneficiary under MWPA policies. The Bombay High Court ruled at the time: "The premium paid for life insurance policies under the MWPA are not gifts made to the beneficiary of the policy. The policy is deemed to be a trust created for the benefit of the assessee's wife or children, but that does not make the payment of each and every premium by the assessee to keep alive the policy of insurance in discharge of his obligation in a contract of insurance made by him with LIC a gift by the assessee to the beneficiaries of the insurance policies." The same principle can be extended to policies assigned by the policy holder to any other person. Before the abolition of gift tax, the premiums paid by the policy holder after the assignment would not come under the purview of gift tax, but the income arising out of the surrender or maturity proceeds of the policy was clubbable. The Income-Tax Act, which contains the clubbing provisions, is different from the Gift Tax Act. Henceforth, on normal policies, though neither surrender nor maturity value will be treated as a gift, the clubbing provisions will be applicable! I found your article on demat very informative. I am a non-resident Indian, holding some shares allotted through the NRI quota of a public issue, in the joint names of my mother, father and wife, who are/were resident Indians. (The fact is mentioned in my share applications.) Please note that I am the sole applicant for all the shares. Are their consent/signatures required for deleting their names? Separate demat accounts are to be opened for each company and/or each individual if he is a joint applicant/holder. In accordance with the new rules and regulations, it seems necessary to open demat accounts. Please advise me on the procedure for getting their names deleted and also the procedure for making them nominees to the shares instead of joint holders. Also advise me on whether the demat account should be opened before getting their names deleted or after. Can you also recommend a reliable DP with whom I can open a demat account as well as a broker for selling and buying shares?
-Abdul Rafeq Khatib, arkhatib@hotmail. com, rafiqismail@yahoomail.com, arafeeqismail@123india.com
I am afraid there are a number of ambiguities in your data. You say "I am the sole applicant for all shares" and yet there are joint holders. Then again, "Separate demat accounts are to be opened for each company and/or each individual if he is a joint applicant/holder". Moreover... Well, forget it. I shall answer according to my conception of your case and if I am wrong, you will have to excuse me. Please do not hesitate to revert to me. The process of deletion is simple. This would be considered a sale by all the joint holders (including you) to you. All you have to do is sign the standard transfer form wherein the joint holders (including you) will sign as a seller and you will sign as a buyer.
I do not much approve of single holdings, in spite of the nomination facility that has been made available recently to shares. It appears that your wife is abroad with you and no more a resident because you say "my mother, father and/wife, who are/were resident Indians". If that be the case, you should transfer your current holdings into a joint holding with your wife and you. Incidentally, what about your children?
Separate demat accounts are not necessary for each company, but for each combination and permutation of the joint names. For instance, if you have TELCO and TISCO held by you, your mother and father, only one demat account is necessary. However, if you have some TELCOs in your name and that of your mother and father and some more in your name and that of your father and mother, you will require two DP accounts.
Whatever gave you the idea that "in accordance with the new rules and regulations, it is deemed necessary to open a demat account with any DP"? There is no compulsion, unless you propose to sell your shares. Even in that case, SEBI has provided an exit route for 500 shares or less; but some brokers are taking undue advantage of the situation by charging a heavy discount on the traded price by treating these as non-marketable, even if they are marketable. Strangely, SEBI has not taken any corrective action and is unlikely to take any. Bad!
You have asked me to recommend a DP to you. This is quite dangerous for me. I shall earn a few friends, but many more enemies. Nevertheless, since my loyalty is towards my readers, I recommend three DPs: the Stock Holding Corporation of India, HDFC Bank Ltd and ICICI Ltd. And finally, I am of the considered opinion that technocrats like you would do well to pocket the benefits of the equities by investing in equity based schemes of UTI/MFs rather than directly in individual scrips. Direct investment in equities requires continuous monitoring and on-line contact, which you cannot afford.As of today, I do not have a website of my own, but you are giving me ideas.
I have equity shares (longterm) of companies that are either closed or sick under BIFR. I do not receive any communication from them. Now what documents do I need to submit to the ITO along with my income-tax return to set off these losses against my longterm gains in sale of other assets?
An Indian company was taken over by a multinational. As per the SEBI guidelines, this multinational company gave an open offer for purchase to the other share holders. This offer was missed by me. Subsequently, the company share was delisted from the stock exchange. Now my repeated requests to the company for repurchase are met with stony silence. What option do I have?
A Bandyopadhyay, amalbyay@vsnl.com
You can claim the loss if and only if you can prove to the Income-Tax Department that you have made all attempts (e.g., filing a suit against the companies) to recover your money and failed. I know this is rather difficult for a small investor like you and hope that the authorities will provide some solution. Until then, the best you can do is pray.
Please draw the attention of SEBI to your case. The author may be contacted at anshanbhag@yahoo.com.Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.
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