Question

State whether the following receipts are taxable in the hands of the individual and if so, under which head of income:

(a) Profits arising from the sale of rural agricultural land situated in India. 

(b) Dividend income received from a company who has only earned agricultural income. 

(c) Profit on sale of personal jewellery. 

(d) A gift of Rs. 31,000/- each received from 5 friends on the occasion of the marriage.

(e) Short term capital gains from the sale of equity shares on which securities transaction tax has been paid.

Answer 1

The treatment of the receipts is as follows:

(a) Not taxable as the land transferred is a rural agricultural land and rural agricultural land is not a capital asset.

(b) Dividend is exempt in the hands of the shareholder u/s 10(34). However, the company shall have to pay dividend distribution tax even though income received by the company is agricultural income and therefore exempt.

(c) Taxable as income from capital gains as personal jewellery is a capital asset.

d) All such gifts shall be exempt on the occasion of marriage.

(e) It is taxable under the head capital gains at special rate of 15%.