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Gift of car from father in law to daughter in law

Rajiv (Exe. Engg.) (29 Points)

29 August 2011

My father wants to gift money for buying a car to my wife i.e. a gift from father in law to daughter in law.

1) I suppose it will be exempt from any type of tax.

2) I suppose as there is no income generated out of it then there is no any implication of clause 64 (Clubbing).

3) Wanted to know that whether my wife (who is a medical professional) can claim the depriciation of the vehicle from her taxable income from the medical proffession.

Thanx & regards

-Rajiv

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5 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 30 August 2011

1) The Gift given by your father to your wife shall be exempt.

2) But, if the Car is bought from the money which is received as gift and generates any type of Income (for eg : income from Hiring of Car), then such income shall be taxable in the hands of your father.

3) Yes, your wife can claim depreciation on the Car by showing it in her Balance Sheet.

Regards,

Devendra K

1 Like

Shah Tarun (Student) (800 Points)
Replied 30 August 2011

Gift from relatives is exempt so there is no problem regarding that but I think you should think about following points...

1) To claim depreciation on this Car your wife need to show it in her balance sheet,

2)To take it into books of account it will be credited to her capital account,

3)Thus her capital account will be credited by value of car which is purchased by the money received by Gift,

4)So it will be considered as Gifted money invested in profession and Sec. 64(1)(vi) will get attracted and proportionate profit will be clubbed with income of your father..

As per my view it will be better to show it as an unsecured load instead of gift..

1 Like

Dhanabal Ramasamy (CHARTERED ACCOUNTANT) (105 Points)
Replied 30 August 2011

Hai...

Gift from the relative is completly exempt so it is not taxable in the hands of your wife. Then depreciation can be claimed by your wife as if it is be incorporated as captial asset in the balance sheet of her business(sole proprietor).

There is no income generated out of car as it is used in her business only. So there is no need for clubbing. The clubbing provision applicable only when transfer is made with a view to avoid tax, as in your there is no such thing.

Rajiv (Exe. Engg.) (29 Points)
Replied 30 August 2011

Hi,

Thanks a lot for guidance. Mr. Tarun Shah, U have suggested some other way. In case my father gives the cheque of the gift directly to the dealer and purchases the car will that still be able to be considerd as the capital invested in the proffession?

Thanks & regards

-Rajiv