LIVE GST Certification Course by CA Arun Chhajer begins 21st April. Register Now!!

Gift deed execution and income tax

Preeti (MBA) (37 Points)

04 February 2013

Dear all,

I need suggestion from experts here on below issue:

My father in law wants to give a gift of approx 25 lakhs to my husband.We are jointly purchasing one property.

My father-in-law is planning to execute Gift Deed for this.He got this money post retirement from Government.By executing gift deed,he wil get rebate in income tax.(He is currently 59 years old and gets pension also (30 K monthly)).

I just want to understand few points:

1- At first place, is it really required to execute the gift deed?

2- Donee(in this case my husband) is in service and comes under slab for 30% tax.Will the amount transferred as gift from my father-in-law would come under my husband's taxable income?

Please advise.

Reply
Follow
Share

11 Replies

abc (Student CA Final ) (132 Points)
Replied 04 February 2013

yes it is better to have a gift deed for this big amount.

No it is not taxable to your husband since he is receiving it from his own father.

1 Like

Preeti (MBA) (37 Points)
Replied 04 February 2013

Hi abc,

thanks a lot.I messaged you also one query.Could you please reply.

1 Like

Dheeraj (Learner) (1100 Points)
Replied 04 February 2013

If the gift amount recd. is more than ₹50,000 from other than relatives only then it is taxable.

But a relative can gift any amount provided GIFT DEED is executed otherwise whole the amount received by receiver (your husband) will be taxable in the hands of receiver of amount. Therefore GIFT DEED is necessary to avoid TAX in the hands of rceiver (your husband) of amount.

Further as you said above that, "by executing gift deed he (father in law) will get rebate in INCOME TAX"

There is nothing like so in income tax that the amount (₹25,00,000) he recd. after retirement and gift the same to any relative then he will get rebate in income tax. The amount will be taxable in the hands of Assessee (Father in law) as same if there is no gift to his son (Your Husband)

1 Like

Ankit (CA, CS) (3064 Points)
Replied 04 February 2013

Preeti,

you may / may not execute a fomral gift deed as, registration is mandatory only in case of a gift of property. you may make a gift deed on a plain paper and take the signature of the doner and the donee i.e. father in law and husband

since the gift is received from a relative, the same is not taxable in your husband's name

1 Like

Preeti (MBA) (37 Points)
Replied 04 February 2013

Thanks Dheeraj and Ankit.

I still have some doubt for income tax related thing.Will appreciate your feedback on that.

As per my knowledge, there would be a rebate for tax payer for some amount, if he/she gives a gift to close relative.

talking about current financial year :

My father-in-laws annual income post retirement is approx 9 lakhs and he is below 60 yrs(59 Years)

Can he claim any where the amount for tax exemption for this current financial year(what he has given to his son as gift)??

If yes, what is the maximum amount he can claim for exemption of tax rebate.

Thanks in advance

Dheeraj (Learner) (1100 Points)
Replied 04 February 2013

No, There is no such rebate in Income Tax

Ankit (CA, CS) (3064 Points)
Replied 04 February 2013

Preeti,

There is no such rebate allowed to the doner in the income tax act.

the only advantage in gift to a close relative is that the receiver does not have to pay tax since he enjoys an exemption under the act

Ankit (CA, CS) (3064 Points)
Replied 04 February 2013

Preeti, There is no such rebate allowed to the doner in the income tax act. the only advantage in gift to a close relative is that the receiver does not have to pay tax since he enjoys an exemption under the act

abc (Student CA Final ) (132 Points)
Replied 04 February 2013

THERE IS NO REBATE PROVISION FOR GIFT IN INCOME TAX... THERE IS ONLY EXEMPTION AS THE SAME IS NOT A TRANSFER U/S 2(47) UNDER INCOME TAX ACT 1961.

1) Father in law will not get any rebate (as there is nothing like REBATE in this case)

2) But father in law will get EXEMPTION from TAX as he was a GOVT EMPLOYEE. Hence 50 lacs NOT TAXABLE as gratuity is a retirement benefit the assessee - your Father in law

3) whether he gifts full 50 or part 25 lacs - It is not taxable to his son and neither to him -- as gift is received from someone and given to someone in BLOOD RELATION - Hence no tax again

4) wherever ur husband invests this gift - it is of no relevance as far as taxation is concerned

5) there is no benefit for donor this gift ur father in law and also there is no tax to him

6) as far as ur husband invests the money in house and keeps ur mother in law as second / joint holder - this is also not taxable to ur mother in law.... as the owner is ur husband

7) if ur husband buys flat and gifts to ur mother in law - this is also not taxable

8) even if the wife wishes - she can also contribute along with husband - NO TAX TO HUSBAND HERE ALSO AND NOR to UR MOTHER IN LAW

9) DONEE has no action to take except showing this amount as gift received in return of income.

10) alternatively, even if ur father in law gifts to ur mother in law (his wife) then also it is ok. i mean if u dont want to route the transaction so long... else whatever u said is also fine....

just that

as per ur saying
ur FIL gifts ur husband and ur husband buys in name of MIL as joint holder

(this will make husbands FILE STRONGER)

as per my saying
ur FIL gifts ur MIL and ur MIL herself buys it and then ur husband can inherit the same in future.

(this will make MIL (MOTHER IN LAWS) FILE STRONGER)

Choose as per ur convenience... NO TAX IS THERE IN THIS CASE.... and FATHER IN LAW GETS NO REBATE ON ABOVE...BUT ONLY EXEMPTION I.E. NO TAX

IF FATHER INVESTS IN FIXED DEPOSIT... his interest income wil be taxable but IF he is a senior citizen he will not fall in tax bracket and hence if BANK deducts TDS he will get REFUND. IF HE IS NOT A SENIOR CITIZEN .... HE WILL GET SAY INTEREST OF 250000 PER ANNUM ON 25 LACS.... HE SAVES!!! AND ON THIS TAX @ 10.30% SAY 25750 WILL COME....BUT HE CAN AVOID THIS BY INVESTING THE AMOUNT OR PAYING HIS LIFE INSURANCE PREMIUM ETC... OUT OF THIS 250000/- INTEREST ANNUALLY (APPROX) :)