Gift money
This query is : Resolved
09 March 2016
I want to invest some money into a start-up. I would appreciate if information can be provided for various scenarios.
1) Please let me know what are the tax implication for me if I receive fund (say Rs. 10 Lakh) from my brother and invest into the start-up (both are salaried individuals).
2) I have a property. If I sell it and invest the money into the start-up, there should be no tax implication for me (as per provision in the new start-up policy). May please confirm.
3) Is it possible that I make an arrangement with my brother where he provides funds to me in lieu of the property to have least tax implication without disposing off the property.
May kindly provide any useful information.
1) Please let me know what are the tax implication for me if I receive fund (say Rs. 10 Lakh) from my brother and invest into the start-up (both are salaried individuals).
2) I have a property. If I sell it and invest the money into the start-up, there should be no tax implication for me (as per provision in the new start-up policy). May please confirm.
3) Is it possible that I make an arrangement with my brother where he provides funds to me in lieu of the property to have least tax implication without disposing off the property.
May kindly provide any useful information.
13 March 2016
Experts may please respond.
25 July 2024
Certainly! Here are the tax implications and considerations for the scenarios you mentioned:
1. **Receiving Funds from Brother and Investing in Start-up**:
- If your brother gifts you Rs. 10 lakh, there are no tax implications for you under the Income Tax Act, 1961, as gifts from relatives are exempt from tax.
- When you invest this amount in a start-up, any gains or profits you earn from the start-up will be taxable as per the applicable provisions, such as business income or capital gains, depending on the nature of the income.
2. **Selling Property and Investing in Start-up**:
- If you sell a property and invest the proceeds into a start-up, the capital gains tax implications will depend on various factors such as the holding period of the property and whether it qualifies for exemptions under Section 54 or Section 54F of the Income Tax Act.
- Under Section 54GB of the Income Tax Act, if you invest the capital gains from the sale of a residential property into eligible start-up companies, you can claim exemption from capital gains tax. This exemption is subject to certain conditions and limits.
3. **Arrangement with Brother for Funds in Lieu of Property**:
- If your brother provides funds to you in lieu of property, this could be structured as a loan or an advance against the property.
- If it's structured as a loan, the interest received by your brother from you may be taxable as per income tax provisions applicable to interest income.
- From your perspective, if you eventually sell the property and use the funds received from your brother for investing in a start-up, the tax implications will depend on the nature of the transaction (sale of property and investment in start-up) and whether any exemptions under Section 54GB are applicable.
**Useful Information:**
- **Section 56(2)(x)**: Under this section, if you receive any sum of money without consideration or for inadequate consideration, it is treated as income in your hands, unless specific exemptions apply (e.g., gifts from relatives).
- **Section 54GB**: Provides for exemption from long-term capital gains tax if gains from sale of residential property are invested in eligible start-up companies within specified timeframes and conditions.
For detailed and specific advice tailored to your situation, it is advisable to consult with a qualified tax advisor or chartered accountant. They can help you structure transactions in a tax-efficient manner and ensure compliance with all relevant tax laws and regulations.
1. **Receiving Funds from Brother and Investing in Start-up**:
- If your brother gifts you Rs. 10 lakh, there are no tax implications for you under the Income Tax Act, 1961, as gifts from relatives are exempt from tax.
- When you invest this amount in a start-up, any gains or profits you earn from the start-up will be taxable as per the applicable provisions, such as business income or capital gains, depending on the nature of the income.
2. **Selling Property and Investing in Start-up**:
- If you sell a property and invest the proceeds into a start-up, the capital gains tax implications will depend on various factors such as the holding period of the property and whether it qualifies for exemptions under Section 54 or Section 54F of the Income Tax Act.
- Under Section 54GB of the Income Tax Act, if you invest the capital gains from the sale of a residential property into eligible start-up companies, you can claim exemption from capital gains tax. This exemption is subject to certain conditions and limits.
3. **Arrangement with Brother for Funds in Lieu of Property**:
- If your brother provides funds to you in lieu of property, this could be structured as a loan or an advance against the property.
- If it's structured as a loan, the interest received by your brother from you may be taxable as per income tax provisions applicable to interest income.
- From your perspective, if you eventually sell the property and use the funds received from your brother for investing in a start-up, the tax implications will depend on the nature of the transaction (sale of property and investment in start-up) and whether any exemptions under Section 54GB are applicable.
**Useful Information:**
- **Section 56(2)(x)**: Under this section, if you receive any sum of money without consideration or for inadequate consideration, it is treated as income in your hands, unless specific exemptions apply (e.g., gifts from relatives).
- **Section 54GB**: Provides for exemption from long-term capital gains tax if gains from sale of residential property are invested in eligible start-up companies within specified timeframes and conditions.
For detailed and specific advice tailored to your situation, it is advisable to consult with a qualified tax advisor or chartered accountant. They can help you structure transactions in a tax-efficient manner and ensure compliance with all relevant tax laws and regulations.
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