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Tax implications of gift/investments

nirav (Others) (50 Points)

13 July 2016

I want to gift money (in form of investment) to my son and my grand daughter both. Is there any tax implications/tax on interest obtained from the investment etc. or any limit in a financial year for the same?

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9 Replies

CA Srujann kumar Reddy (Asst Manager(Internal audit)) (1679 Points)
Replied 13 July 2016

assuming money you are giving to son and grand daughter is taxed once in your hand, the same if you give to your son is not taxable as he is a relative and for your grand daughter will not be covered under relative definition for you however she will be a relative for your son, you can gift. as per income tax provisions what ever the gift from relative is not taxable

nirav (Others) (50 Points)
Replied 13 July 2016

Does it mean that I can not gift to my grand daughter? Isn't she my direct relative? Pl. explain.

Thanks

CA Srujann kumar Reddy (Asst Manager(Internal audit)) (1679 Points)
Replied 13 July 2016

as per income tax relative definition

for an individual spouse, siblings, children, parents and their spouses will be treated as relatives

nirav (Others) (50 Points)
Replied 13 July 2016

I have read as follows about definition of relative for gift:"The first group of people who would qualify as a relative under the rules would be the brother and sister of the individual. This along with the term all lineal ascendants and descendants ensures that the immediate family members would be considered as a relative. This would mean the father as well as grandfather as well as children and grandchildren. This makes the process of giving easier when so many people would be present to be covered under the term of relative."

Isnt above true?

CA Srujann kumar Reddy (Asst Manager(Internal audit)) (1679 Points)
Replied 14 July 2016

apologies i have read again, lineal ascendants and decendants covered, you can gift, sorry for wrong guiding

nirav (Others) (50 Points)
Replied 14 July 2016

Thanks..!

Finally, i understand that I can gift to my son and grand daughter both and there won't be gift tax. However, can pl. tell me whether any implication on account of clubbing provision of income tax? In other words, once I do investment (gift) in name of my son and daughter then who is liable to pay tax if some return is generated from that investment? For grand daughter who is minor so I want to invest in suramya scheme of government. In that case will there be any tax on my son as Minor's income is to be clubbed with parents income?

Pl. Clarify above doubts. Thanks once again.

CA Srujann kumar Reddy (Asst Manager(Internal audit)) (1679 Points)
Replied 14 July 2016

minor daughter income will be clubbed to the father or mother as per 64(1A), interest income which your son will get and grand daughter has to be taxed in the hands of your son

nirav (Others) (50 Points)
Replied 14 July 2016

Thanks but since i said sukanya samruddhi scheme of government which is EEE (tax free) in that case i think there will not be any tax in hands of my son even with clubbing provison. Same way if i invest for my son in EEE instrument then i think no tax would be applicable. Am i right?