Clubbing query (when gifts given to multiple family members)

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JJJ

Need help

689 Points Joined November 2021

have a query regarding clubbing provisions, if anyone has any input!

Mr X is going to turn 80 and he wants to gift money to several family members.

He plans to redeem mutual fund investments and pay the appropriate capital gains tax on the redemption.

From the redemption proceeds, he wants to gift by RTGS Rs 10 lakh each to his wife, daughter, son, son-in-law, daughter-in-law and the grandchildren.

Question is what could the possible clubbing issues be in such a situation? Also, all the adults (wife, daughter, son, daughter-in-law, son-in-law) are income earners and taxpayers on their own anyway. And maybe earning more than the old man.

And of course, whatever each recipient of the gift earns from whatever they do with it is subject to tax. That's clear.

From all that I have read, the gifts to the daughter / son / grandchildren seem to have no issues. But the wife / daughter-in-law / son-in-law situation is not too clear.

Replies (3)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

209674 Points Joined July 2016

Clubbing providsion will apply only in case of gift given to wife & daughter-in-law.

JJJ

Need help

689 Points Joined November 2021

Thnak you. And yes, that is my understanding of the rules.

But I am still strugling to make sense of it.

When is it taxable in the hands of the person giving the gift? He redeemed mutual funds, paid capital gains tax, and then gifted the proceeds to his wife and daughter in law. Both of them invested that gift amount in mutual funds. God only knows when they will redeem their MF investments. And whenever they do, they will anyway have to pay any applicable capital gains tax (both are income earning and taxpaying).

And anyway the daughter in law earns more and is in a higher tax bracket (she pays surcharge!). So how is this determined?

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

209674 Points Joined July 2016

Whenever the units are sold, the capital gain will be taxable in the hands of the donor and not in the hands of wife or DIL. The capital gains liability is only for once but trasferred in the hands of donor. Donee need not pay it again.