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Gift to employee's child

Tax planning 756 views 1 replies

llllVICTORllll

Internal Auditor

511 Points Posted on 30 August 2012

My Question is in Two Parts from different perspective

Scenerio: Company has given cash prize to employee's Child for securing good marks in exam, amounting to Rs. 4000

1. Can this expense be booked as business expenditure for the company? if yes then why and how(under which head)?

2. Being income to minor Child of the employee, and clubbing provision attracted, should company deduct TDS on income of minor child, from employee?

Replies (1)

Tushar Thakar

student

57 Points Posted on 30 August 2012

llllVICTORllll

Hello Victor,

Ans to your 1st part:- According to the given senario, gift to Employees child cannot be recorded as business expenditure for the company. Because it is as good as Donation/ charity/ help etc.. The cash prize has nothing to do with Bussiness of the company. Its not an bussiness expenditure.

.Ans to your 2nd part :- It is an income to minor child but in the form of GIFT, hence it will come under the head Income From Other Sources. Being a Minor this income will be shown in the income statement of the Employee (Parent of that child). It will be exempt because Gift is BELOW Rs. 50,000/-

U/S 10 of Income Tax Act.

If you still have some doubt feel free to ask.

Thank you