Arjuna (Fictional character): Krishna, Valentine's Day (14th February) is the festival of love, which is now celebrated worldwide. Love is the essence of life, it holds great importance in the life of a human being. While expressing love and affection to beloved ones, certain transaction of give and take of money, assets, etc., happens, are they taxable under Income Tax Act, in short “Is LOVE Tax free”?

Krishna (Fictional character): Arjuna, Love is the root of all the things, which a human do in day to day life. The base of all the relationships, for e.g., Husband-wife, Parents - children, friends, young couples, etc is “Love”. However when feelings like greed, anger, jealousy, etc is mix up with Love, it ruins the relationship. In today’s, world it is rare to find True Love. Monetary Transactions carried out of “Love and Affection” may become taxable under Income Tax Act, hence be careful. Further certain transactions (out of love and affection) with specified persons are only Tax free. Honorable Supreme Court had occasion to discuss “Love and Affection” and Income Tax in case of Tulsidas Kilachand it held that It remains to consider whether there was adequate consideration for the transfer. Reliance has been placed only upon love and affection. The words "adequate consideration" denote Consideration other than mere love and affection, which, in the case of a wife, may be presumed. When the law insists that there should be "adequate consideration" and not good consideration", it excludes mere love and affection. They may be good consideration to support a contract; but adequate consideration to avoid tax is quite a different thing. To insist on the other meaning is really to say that consideration must only be looked for, when love and affection cease to exist.”

Arjuna: Oh Great! So let us co-relate the journey of human life with various stages of love with income tax provisions. The first stage of love is before marriage period, in which exchange of gifts or money, etc. in courtship period between the two love birds happens, are they taxable?

Krishna: Courtship period is the golden period for the youth couples. However as per Income tax and other laws, they will be considered as legal “husband and wife” only after marriage. Therefore Gifts given out of Love and affection, above Rs. 50,000 before marriage will be taxable in the hands of receiver. In this period everyone should be cautious while exchanging gifts. So keep in mind if, Tax and Love planning is not done carefully. In this golden period of love, due to over excitement unwanted things should not happen. In this period the expenses on mobile bills, meeting each other, gets increased. Further today’s youth gives importance to money along with love, therefore selection between Career and Love become difficult.   

Arjuna: Krishna, after the golden period, comes the second stage of Love life i.e. marriage. In this couple receives gifts and money, spends on house hold expenses, etc, what about its taxation?

Krishna: Arjuna, marriage is auspicious event of coming together of two hearts and their families. There is happiness all around and love journey of the couple starts from this stage. On the occasion of marriage all gifts received from anyone of any value are tax free. But the list of gifts received with complete details of donors, etc. should be maintained. Further expenses of marriage, honeymoon tour, etc. should be properly recorded. However takes care that, in beginning of married life, obstacle of money or wealth should not arise. The couple should keep the ornaments received by bride properly. As women’s are very affectionate for the things received from her parental family. This feeling behind it should be considered by men’s. If husband and wife make financial planning from the start, then financial obstacle will not arrive in their relationship and love life will become easier. Husband and wife should make investments in generally in joint names. Further in case of Husband and wife, as per clubbing provisions of Income Tax Act, income derived from money gifted by one to other will be treated as the income of the giver. If husband and wife are doing job or they have their own business, then rules of income tax will be applicable to them separately and they both will have to file separate income tax returns.     

Arjuna: After marriage life, comes birth of children’s and family grows, how couple should take care of the financial transactions in this stage of love life?    

Krishna: The real love and affection of family, starts after having children. Husband and wife after paying their own income tax, house expenses, etc should save for their investments, deposits and House, etc. Further the couple should make tax planning of children’s education expenses, home loan EMI, life insurance premium, medical insurance premium and investment in public provident fund, etc. in such a way that income tax exemption will be taken at optimum level and it will also help children in the future. Children need love from their parents but the life of children will be enlightened if, parents make a strong financial base for children and give them good education and good virtues. Further after having children little quarrel between couple keeps going in love life on the subject of Money, Time, House works, etc. But planning should be made in such a way that financial quarrel should not start and house hold expenses should be mate properly. As per Income tax act deduction of tuition fees and educational loan is available. Husband and wife can take the deduction if these expenses are spent from their own earnings. Further gift given by father and mother to their children is tax free. This is most crucial period of love life, where expenses are high and one has to strive for savings.     

Arjuna: How husband and wife should make financial arrangement for old age love life?

Krishna: Listen Arjuna, with the love of mother and father children become young and in search of their love and carrier they will stabilize their family independently or jointly. This is the cycle of life. In the old age husband and wife should look after their health and financial earnings. In the old age, no parent feels good to demand money from their children’s. Therefore by savings, plot, house, etc should be purchased in the joint names by couples. As in the old age husband and wife needs help of the other more due to health issues. Just due to love and affection between husband - wife and love of grandchild’s life becomes easy at this age. The benefit of senior citizens is available after the 60 years of age under Income Tax. Further if the self-owned house is kept with bank under Reverse Mortgage Scheme, in the old age money will be received in monthly installments for daily needs and couple can live happily in their house also. 

Arjuna: In life, lovable relationship is also established with the friends, relatives. What about the financial transactions carried out with them due to love and affection?

Krishna: In income tax the definition of “relatives: is given, however the definition of friend is not given in any law. Person cannot make selection of relative but he can make selection of the friends in his life. Friend is lovable person and he also helps in difficulties. There should be good relation with the relatives but monetary transactions, gifts etc. should be done with due care. Tax is not levied on the gifts received from the specified relatives. Further the transaction of accessorial properties should be carefully done according to law. In the relation of friends money should not come. If transactions are incurred with the friends as per income tax act they will be taxable. It means if hand loan or advance given to friend due to love and affection, in view of commercial and business expediency interest income may be shown, otherwise it may create problem as per income tax. If gift of more than Rs. 50,000/- received from friend then it will be taxable. Further one should not judge his friends on the basis on friend’s wealth.      

Arjuna: On the occasion of valentine day, how one should one balance relation of love and money?

Krishna: On the occasion of valentine day as a symbol of love one must give gift to his /her beloved ones. But love should not be valued on the basis of value of gifts. Because money creates greed and it spoils the relation. Love should be made from heart and financial planning should be done from brain. In life things done for love are always beneficial than the things done from money. Actual problem arises here only, some do anything of love and some do anything for money. Man in the greed of money becomes ready to do anything even forgetting love and affection. The human life is going on because of love only; otherwise the one who does not have money might have lost everything in life. At the end, the thing that a person who made the other lives happy and easier with the love lasts forever and not how much he has earned. Therefore money never won in against love. There is huge difference between Love for money and Money for Love. It is not wrong to earn money but only love for money is wrong. Lost money can be earned back, but lost love cannot. Love is tax free, but it is not true for the one who love for money.  

Dear Karniti Lovers, your comments please, I love them.

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CA Umesh Sharma
Category Income Tax   Report

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