Case study: lending to closed relative for a period of 5-6 months.

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Hi below is tha scenario. Your opinion welcomed.

Actors

1) Radhika  (house wife. no income, never ever paid tax)

2) Ramesh ( radhika's brother, college student , no income, never ever paid tax)

3) Lata ( radhika's mother, house wife, no income, never ever paid tax)

4) Dhake (radhika's father, farmer, agricultural income, never ever paid tax)

5) Veronica (radhika's Mother- in law, rental income, pays tax)

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Veronica transfers via bank  Rs.3 lacs to => Radhika. she trades in FNO. Turns it into Rs.6,97,500 . Profit of approx Rs. 4lac. from (June 2019 - sept 2019)

Radhika transfer Rs 4.9 lacs to Ramesh(brother). He trades in FNO . Turns it into Rs.9,47,500 . Pfofit appx Rs 4.57 lacs From (sept 2019- nov 2019).

Note:- Now Ramesh returns the 4.9 Lac borrowed money back to Radhika

Question

1) For ramesh: Is the borrowed money (Rs 4.9) taxable for Ramesh?

2) For Radhika: Is the bank statement enough to prove that the Rs.4.9 recieved by Radhika is not any profit but the money that she had lent it to her brother. Or any other paper work needed?

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Now again Radhika lends money to her father Rs.4.9 lac He makes profit in FNO same as above and return Rs. 4.9 back to Radhika via online bank transfer 

Note : every thinng happens in the same financial year.

Questions

 

1) For Dhake : Is the borrowed money (Rs 4.9) taxable for Dhake ?

2) For Radhika: Is the bank statement enough to prove that the Rs.4.9 recieved by Radhika is not any profit but the money that she had lent it to her Father. Or any other paper work needed?

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Now Bother Ramesh and Mr. Dhake transfer their profits to Radhika as GIFT.(i.e Rs 4.57 lac + Rs. 4.57 lac) = Aprox ( 9 lacs)

Now the total Money in Radhikas account is

Mother-inlaw = 3lacs (GIFT to daughter in law)

Radhikas Profit from FNO = 4 lacs  (PROFIT)

Ramesh = 4.57lac  (GIFT to sister)

Dhake = 4.57lacs  (GIFT to daughter)

Total = Approx Rs. 16 lac

IMPORTANT QUESTION :  HOW much tax will radhika have to pay and what proof required for th excess money in account to be justified.

 

 

 

 

 

 

 

 

Replies (4)

Case 1. Ans 1. Borrowed Money is not taxable, only Capital gain is taxable.

Ans 2.Bank statement is enough.

Case 2. Ans 1. Capital gain taxable.

Ans 2.Bank statement is enough.

Case 3.Registered gift deed is required. Gift from relatives (relatives definition given in IFOS of income tax act) is not taxable. Only profit earned i.e capital gain will be taxable in hands of Radhika.

Only the 4 lakhs profit earned by Radhika from F&O is taxable in her hands. Dhake and Ramesh shall be taxed separately to the extent of their profits from F&O, in order to make the gift to daughter and sister respectively a valid source. Since all the transactions have taken place through banking channel, Bank statement will be sufficient proof to this case.

If in case required during assessment, letters from Dhake and Ramesh declaring the Gift amount and a letter from Veronica for Loan given to Radhika shall be submitted.

Since the relative is brother and  father  and mother in law, is the GIFT deed still required?

ALSO HOW much amount can a closed relative like father, mother or brother can gift ? And how much tax doe the reciever has to pay on that gift by close relative like F,M & Bro?

Yes, Gift deed is must for such a high amount.

And its safe too.


CCI Pro

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