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Advice ?

Rahul Bansal (Finalist) (35929 Points)

10 September 2011

If a child gives money to his parents ,,,,,,,,,,,,whether it be considered as a gift or a loan......?

If it consider as a loan or a gift...what will it be to be consider?

if onsider as a loan.....then what will be tax implication ?

if consider as a gift.....tax implication ?

further those money then invested by his parents in shares ...what will be tax implication ?

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9 Replies

BPAst (others) (209 Points)
Replied 10 September 2011

Dear Rahul, In my opinion, it depends on the expressions of the document, if executed. in the absence it can be treated as either. if the intention is there to repay then it is a loan other wise it is a gift. as per Income tax law, it will be taxed in thier individual hands. because law does not provide for clubbing of income parents income with that of child. it provides for other way round. Other views are awaited.

1 Like

Rahul Bansal (Finalist) (35929 Points)
Replied 10 September 2011

thanks a lot friend

CA Hardik Bunha (self) (2121 Points)
Replied 10 September 2011

Hi my Friend.

If consider as loan ------- No tax implication.

If consider as Gift --------- No tax implication.

if those money invested in shares and then any gain or lose will arise will be taxable in the hands of his PARENTS ( Clubbing Provision will be applicable)

1 Like

Rahul Bansal (Finalist) (35929 Points)
Replied 11 September 2011

thanks hardik...........:)

SANYAM ARORA (“It's hard to beat a person who never gives up.”) (20168 Points)
Replied 11 September 2011

Originally posted by : BPAst
	Dear Rahul, In my opinion, it depends on the expressions of the document, if executed. in the absence it can be treated as either. if the intention is there to repay then it is a loan other wise it is a gift. as per Income tax law, it will be taxed in thier individual hands. because law does not provide for clubbing of income parents income with that of child. it provides for other way round. Other views are awaited.

1 Like

Nitin Singhal (Gaining knowledge...) (320 Points)
Replied 11 September 2011

@ rahul : it depends on the terms on which oney has been given ( i.e deed or documents). For gift, a gift deed is required. But for loan there is no such condition.

If given as gift, then no tax implication Sec 56 (2) as parents are covered under the definition of relatives.

If given as interst free loan, then there is no tax implication but remember compliance of section 269T and 269SS i.e loans above rs. 20000/- should be taken and given back only by account payee cheque.

If given as Normal loan, then interst paid by father will be treated as income of child.

If money invested in shares, then in all cases income from investment will be incoem of parents.

NOTE: IT HAS BEEN ASSUMES THAT CHILD IS MAJOR, SO NO CLUBBING PROVISION APPLIES.

3 Like

Rahul Bansal (Finalist) (35929 Points)
Replied 11 September 2011

thanks nitin for such a nice explanation..............

CA. Roopali Kadam (Jobs on assignment basis.) (1453 Points)
Replied 12 September 2011

Originally posted by : Nitin Singhal
	@ rahul : it depends on the terms on which oney has been given ( i.e deed or documents). For gift, a gift deed is required. But for loan there is no such condition. If given as gift, then no tax implication Sec 56 (2) as parents are covered under the definition of relatives. If given as interst free loan, then there is no tax implication but remember compliance of section 269T and 269SS i.e loans above20000/- should be taken and given back only by account payee cheque. If given as Normal loan, then interst paid by father will be treated as income of child. If money invested in shares, then in all cases income from investment will be incoem of parents. NOTE: IT HAS BEEN ASSUMES THAT CHILD IS MAJOR, SO NO CLUBBING PROVISION APPLIES.