WHAT ACCOUNTING ENTRIES TO BE MADE FOR :
- GIFT TRANSACTIONS OF MONEY AMOUNT ?
- IN THE BOOKS OF DONOR - WHO GIVES MONEY AMOUNT AS GIFT
- IN THE BOOKS OF DONEE - WHO RECEIVES MONEY AMOUNT AS GIFT
Accounting entry for gift transactions for both parties
Replies (3)
Quick Summary
In donor"s books - Dr. Gift given ( under capital account ) Cr Casj/ Bank
In donee"s books - Dr. Cash/ Bank Cr. Gift Received (under capital account )
How to show the closing balance for doantions
Entries depend on whose books you are writing:
• Individuals (personal books): donor: Dr Gift Given (capital/drawings), Cr Bank. Donee: Dr Bank, Cr Gift Received (capital account). These are not income or expense.
• Proprietor receiving a gift into the business: credit his capital account, not P&L.
• Company or firm receiving money without consideration: taxable under Sec 56(2)(x) if above Rs 50,000 (the "relative" exemption is only for individuals and HUFs). Also be ready to explain the source under Sec 68.
• Business giving gifts (customers, dealers): debit Business Promotion (P&L). TDS under Sec 194R applies if a business recipient gets more than Rs 20,000 a year. GST ITC on gifted goods is blocked (Sec 17(5)(h)).
• Tax for individuals: exempt if from a relative or on occasion of marriage. Otherwise taxable above Rs 50,000. Keep a gift letter and the bank trail. Cash gifts of Rs 2 lakh or more breach Sec 269ST.
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