Gift made to minor child

This query is : Open

Priyanka Shetty (Querist)
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07 October 2014 Sir,

Please clarify the following queries regarding the below mentioned situation

Suppose i decide to make a gift in cash to my minor son every year to an extent of Rs. 100000.

1.Now due to clubbing of income, will the gift made to him be added back in my income or will it be exempt as i come under the definition of relative.

2.In order to make investment and avoid tax liability, can i invest the gifted amount in PPF in my minor child's name?

3. If the above option is not worth the efforts will creating a Private discretionary Trust be a good option?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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07 October 2014 1. gift wont be added back but any income arising out of gift shall be clubbed with your income.

2. yes you can invest in PPF account. that would take care of even the clubbing of income as interest on PPF will be exempt.

3. no point in creating trust etc for this. Amount is too small to warrant a separate trust creation.

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Priyanka Shetty

Priyanka Shetty (Querist)
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07 October 2014 Thanks for the reply.

As per the PPF rule a person can have only one PPF account in his name.

In case a person had a PPF account when he was a minor and the same got closed at him attaining majority will he able to open a PPF account as a major all by himself.