Become a Govt. Certified GST Practitioner in just 60 hrs. Register Now!

Can we invest in the name of parent

Manish (Software Engineer) (103 Points)

19 August 2020

Hello,

Is it possible that I can gift some amount to my parents or spouse and invest the same in share or any other instrument (FD, Mutual fund) with their name to avail tax saving and lower tax slab as I come into higher tax slab.

Thanks,

Manish

Reply
Follow
Share

7 Replies

Yudhishthir Sharma (Article) (207 Points)
Replied 19 August 2020

Yes, Mr. Manish

It is possible that you gift of some amount to parents and investment their name to avail benefit of tax slab.

Upgrade to CAclubindia Pro. Subscribe Now!

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 19 August 2020

Yes, it's possible in case of parents, but not possible in case of spouse.
For spouse clubbing provision is applicable, whether you trasfer to spouse directly or indirectly.

Manish (Software Engineer) (103 Points)
Replied 19 August 2020

Hi Sagar/Yudhishthir,

Can you please section for the reference as on multiple place i am receiving response that parent's interest income on your transfer fund will be taxed in your hand. So if you can share some reference for me that would be helpful.

Thanks,

Manish

Kamal Verma (Financial advisor) (588 Points)
Replied 19 August 2020

Practically, gift must be paid from elder to younger otherwise provision for clubbing of income may be applicable.

Manish (Software Engineer) (103 Points)
Replied 19 August 2020

@ Kamal Verma Sorry Even gift can be given from younger to elder but can't we transfer fund to our parents for their need and they can invest it.

Even if it's not allowed can you please share section which describe this SO that I can get more insight.

Upgrade to CAclubindia Pro. Subscribe Now!

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 19 August 2020

1. Any sum of money or any property received from any relative is exempt from tax as per section 56(2) of the Income Tax Act.
Son, daughter, mother, father ect. as defined in act are all considered as relative
So, Gift from Son to Parents is not taxable.

2. Clubbing of Income provisions are given under section 60 to 65 in income tax Act.it restrict
(i)Transfer of income without trasfer of assets.
(ii) Revocable trasfer of assets
(iii) Trasfer to Spouse and son's wife directly or indirectly.
there is no restriction regarding trasfer of money from son to parents. So, clubbing provision also not applicable

So, Conclusion:
Gifts made to parents are not taxable in their hands or in your hands. Also, clubbing does not apply for income earned on money gifted to parents. So, in case they decide to invest the money received from you, any income from such investment will be taxed in their own income tax return, and will not be clubbed with your income.

2 Like