Clubing of income

My father gave me 1000000Rs on which he had paid the complete tax . Now the total amount in my hand is tax free as a gift received from my father. If i invest this amount in share market or mutual fund then the income generated on total investments will be clubed in total incom of my father or shall it be taxable for me?
Replies (7)

No clubbing of income in this case. (assuming you to be major)

The income generated from the gift amount will be assessable in your hand.

Dhirajlal ji,

1) What happens if he gifts it back to his father in some future FY?

2) Should this gift be shown as "Exempt Income" in ITR? Will filing ITR be mandatory in this case? Even if income < 2.5L ?

1. The return of gift...... legally gift cannot be return back......... will be an independent gift from son to father....... and treated accordingly...........  exempt u/s. 56(2)(vii)

2.  Gift is exempt....... and as such capital receipt............. and not being income, not necessary to file return if other income is below 2.50 lakhs.

But according to me advisable to file return and declare such big deals, to avoid any future queries. (though contrary views also hold good in many other cases)

In which case Sec 64 (1) (iv) is applicable? Is it only for Husband and wife?
  • Remuneration of a spouse from a concern in which the other spouse has substantial interest. [Sec 64(1)(ii)]
  • Income from assets transferred to the spouse. [64(1)(iv)]
  • Income from assets transferred to son’s wife [ 64(1)(vi)]
  • Income from assets transferred to a person for the benefit of Spouse of the transferor[64(1)(vii)]
  • Income from assets transferred to a person for the benefit of son’s wife of the transferor [64(1)(viii)]
  • Clubbing of income of a minor child [64(1A)]
  • Income from self acquired property converted to joint family property[64(2)]

Dhirajlal ji,

Can the clubbing provisions on the interest earned be circumvented, if money is routed like this:

Father > Son/Daughter (major) > Mother
i.e.:
Husband > Wife

?

 

As such nothing illegal, but at a time objectionable. Should be neat and spreaded over some time period. (well, I restrict myself to reply such queries..... so sorry for next time.......)

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