Doubt regarding gift and home rent to a close relative

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

03 November 2011 My sister works and gets HRA allowance from her company.
She pays an annual rent of approximately 1 lakh 40000 to my mother on whose name our house is to use the allowance and save tax.

Also my mother shows the same house rent as rent received and files her return accordingly.

Now the problem is my sister is ready to pay 1 lakh rupee to my(our) mother as she received increment and my mother use the same to invest in stocks.

Also since my mother will turn 60 years of age by November 26th 2011,I guess her limit for exempted income under income tax will increase to 2 lakh 40000 from 1 lakh 90000.

She had gifted my mom in past and it was calculated as income as it was gift received from close relative.

But here my sister is worried that 2 entries one of rent paid and other of gift will cause some trouble and might cause some trouble to her in future.

Is her concern valid ? So can she gift to my(our) mom without any trouble?

Also next year return my mom will be filling will be filing return.Does she have to file under senior citizen or the same old rule applies ?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 November 2011 Your sister can gift any amount to your mother and income generating from such gifted amount will be taxed in the hands of mother only.
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Gift entries invite attention of IT authorities and such her concern is not baseless.
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Your mother can file her return as a senior citizen for the AY 2012-13, provided she completes her 60 years during FY 2011-12.

Querist : Anonymous

Querist : Anonymous (Querist)

06 November 2011 But can she do both pay rent which is taxable and gift money(which wont be part of calculating tax) simultaneously ?

I told her to make a gift deed on plain paper for same.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 November 2011 She can Gift money to her mother as she is having natural love and affection for her.
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She is an earning person and, in case, if she takes on rent a similar type of home , she has to pay rent to others also. Rent is thus, a consideration for utilising the house.
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As I wrote, Gift Transactions are sometimes
scrutinised by the IT authorities and as such unnecessary litigations should not be invited. Better she should continue to pay rent only.

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