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Clarification on Cash Gift to Parents

Service



Hi,

I have saved income of around 5L which is saved from my salary after paying of applicable taxes. If I give this saved post tax cash saving to my father, who inturn invests this money in Stocks / FD etc, will there be following tax implications:

1. Do I need to pay gift tax on the above cash gift given to my father? Is there any maximum cap on cash gift that can be given to parents?

2. Is my father liable to pay tax on cash gift received from me?

3. If my father re-invest this money into stocks / FD, will the earnings through these investments be taxable to me or will it fall solely under my fathers income slab who is a senior citizen?

 
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M.Com C.A SAP Consultant


Hi,

1. It will be exempt u/s 56

2. Father will not be liable for any tax liability.

3.Clubbing of income will also be not applicable. So the returns by father will be taxable to father only.

 
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Service



Thanks Abhinav
 
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Partner



In my opinion,

1)No tax implication for you

2) Father income( gift) will be taxable as it exceeds Rs.50,000/- as per sec 56

3) clubbing provisions not will be attracted.

 
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Service



Thanks Halim,

There are mixed feedbacks and hence a confusion. Any IT consultant or practioner has got any confirmed view?

Abhinav, excuse me if you are practioner and your view was practical. Just trying to be double sure.

 
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CA CS B. Com. NCFM (Capital market)


In my opinion halim siddiquiI am Online  is right at second point

 
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CA, CS in Job



Hi,

Mr Agrawal is right and the supportive view is extended below.

1. Gifts are taxable u/s 56(2), but relatives are out of tax purview so  gift will not taxable in hand of your father.BUT make sure that you gift the amount by an account payee cheque.Althogh A/c payee cheques are not required but it for safe side to do such transaction so sa to have a proof of payment..

2.Clubbing of income will also be not applicable. So any income generated by your father using the gifted amount will be taxable to your father only.

 
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Service



Thanks Ritesh,

Any comment on point#2?

 
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CA, CS in Job



Point #2 of mine....?.what kinda comment you require.??

 
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Audit Manager



I dont think Point 2 is right. Because, sec 56(2) dont apply to gifts to relatives.U can count on me for that.So there will be no problem for your father or anyon.

 
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