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Tax treatment for gift in case of divirce

CA DEEPAK BANSAL (ACA, B.COM(H) ) (61 Points)

24 February 2012

Hi To All

I am in some confussion regarding the issue for my question .

the question is -

In a case of divorce and out of court settlement, if father in law is to gift some money to his daughter in law and her child who is to leave his house, then what will be the tax treatment for this type of gift.

and is there any limit for this gift ( cash / cheque gift )

regards

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8 Replies

CA Pankaj Ranawat (Assistant Manager) (86 Points)
Replied 24 February 2012

In my view .. at the time of gift relationship must be in existence. As the relationship is not in existence(Divorced) tax will be levied in the hands of recepient if it exceeds 50,000)

CA Pankaj Ranawat (Assistant Manager) (86 Points)
Replied 24 February 2012

Correct me if I am wrong

CA DEEPAK BANSAL (ACA, B.COM(H) ) (61 Points)
Replied 24 February 2012

at the time of gift the relation ship will exist .

is the relationship of father in law and daugher in law valid for exemption purposes .

CA Pankaj Ranawat (Assistant Manager) (86 Points)
Replied 24 February 2012

I think that cannot be said to be as gift as that will amount to compensation out of court's order

shibu (Accountant) (325 Points)
Replied 05 April 2012

Whether it is father in law or father to his daughter. Will by a court order relationship between father and daughter cease !!! Interesting

Member (Management) (325 Points)
Replied 05 April 2012

The exemption u/s 56 is only for specific relationships. If the lady is divorced, then where is the question of the relationship of spouse or spouse's parents existing? If the divorce is formalized after the gift, then the exemption can be claimed.

1 Like

Neha Popat (CA in Practice- Direct Taxation) (94 Points)
Replied 05 April 2012

I agree with Pankaj.. The amount should be shown as gift in a period when the relationship exists. The definition of relative includes any linear ascendant/descendant of an individual including the spouse. In this case son's wife being spouse of the descendant (son) will be a relative. There is no limit for this gift. The limit of 50,000 applies to gifts recd in aggregate from persons other than 'relative'. However, if the amount is shown as compensation for divorce i.e. after the divirce then, the entire amount will be taxable and exemption cannot be availed.

Anshul Jain (Article) (33 Points)
Replied 05 April 2012

Accourding to my point of view it is exempted if at the time of gift all the paper formalities are not done for divorce because at the time of gift the relationship exist which is covered under the definition of relative and gift which is given is exempted without any limit.