Gift by grandfather from U.S.A

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Sumit B Choksi (Querist)
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04 February 2011 Respected Sirs,

My client aged 34 years has a 8 year old son. His father lives and earns in U.S.A. His father wishes to gift his grandson a certain sum of money. How much amount is taxfree? Is it required to prepare a gift deed? Will the gift be clubbed in his father's income and be taxed?

An another query is that if the Grandfather is paying taxes on his income in USA. Is he liable to pay tax on the sum of money which he brings to INDIA from abroad?

Please explain in detail the remedies to my problems. Also if possible please give applicable sections of the I.T.Act and case laws if any.

Thanks a lot.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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04 February 2011 In case of Gift to minor Grand Son, any amount can be gifted by Grand father and the said amount will not be taxable. It's advisable to prepare a gift deed.

The income earned on the amount gifted only, will be clubbed in the hands of the parent having higher income, and the same will be added in the same manner in the years to come.

Pl. Refer Section 56(2) (vii), 64 & 64(1A).

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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04 February 2011 An another query is that if the Grandfather is paying taxes on his income in USA. Is he liable to pay tax on the sum of money which he brings to INDIA from abroad?

Ans: He is not liable to pay tax when he brings money from abroad on which he has paid taxes there.

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Sumit B Choksi

Sumit B Choksi (Querist)
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05 February 2011 Thanks a lot Bafna Sir. Your guidance will be very helpful.

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