In order not to lay claim to share in residential property, other heirs are prepared to give me cash at municipal circle rate thereof as a gift together with a gift deed after paying requisite gift tax. Would this gift in cash be treated as income for taxable purposes under the Income Tax Act? If so, then what other option do I have to avoid/reduce Income Tax on the same?
Gift from specified relatives is exempt. See Section 56.
Thanks Management.
However, to convince the ITO that the gift of money is from my relatives as per s 56 would I need a Letter of Gift or Gift Deed when the money is transferred to my bank account that could be a few lakhs? If yes, then where could I find a draft for such Gift Deed?
A proper deed of gift (of course the donors will have to have enough sources) can be drafted by anyone with a little bit of legal knowledge. There are no specific formats as such. As I said earlier, such a deed alone is not going to convince the ITO who will want to know if the donors have the capacity to make the gifts.
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