Implication of gift

Individual --> Gift --> Father

The gift amount is exempt in hands of father u/s 56(2)(vii) since its a gift to a relative.

The interest earned on depositing gift amount, will be taxable in hands of Father provided, the (interest income + other income) exceed the Basic Exemption Limit.

Individual --> Gift --> Friend

The gift amount is taxable in the hands of Friend since only gift given to relatives are exempt.

However, if the gift is given to the friend at the time of his/her marriage, then it will be exempt in the hands of friend.

Now if friend earns interest on deposit of such gift, then its taxable in his hands under the head "INCOME FROM OTHER SOURCES".

If father/friend had initially deposited the gift in a Savings bank account, then he may claim Deduction u/s 80TTA (for interest earned on SB accounts) to the extent of Rs. 10,000/- from such interest earned.(Also no TDS would have been made by bank on such SB A/c interest).

Hope this helps.

yes true.if spouse doesn't have any other income.the interest income clubbed in the hands of giver.

Agreed with Sanjay. Father and Spouse comes under relative category so the treatement of that will b same

In the first question, if 'FATHER' was replaced with 'SPOUSE', then clubbing provisions u/s 64 will come into play and the Income on deposit of gift amount will be clubbed in the hands of Individual and such individual will have to pay the tax.

However, it is also notable that "Income on Income is not to be clubbed". For instance, if the spouse were to invest the Income on gift (Rs.10,000 in your case) and the spouse earns another Rs. 1000 on such deposit. Then such income on income ie., Rs. 1000 is not to be clubbed.

Regarding the last query, Gift is something for which no deduction is available under any heads of income. Ultimately, the donor of gift ends up paying tax on gift since he/she does not get deduction for the same. Hence you are right to say that Gifts have no tax deductions under the Income Tax ACt, 1961.

In some instances, the recipients are exempted from tax. eg. Relatives, Gift at time of marriage, etc.

(But donors of gift are not eligible for any deduction unless its given by a business concern and the purpose is Sales/ Service Promotion)

Actually I was using a computer. It's would be quite hard to use bold on a cellphone.

It is better to take a loan from spouse with reasonable rate of interest. Please do remember that taking and giving of loan transaction between the spouse does not attract the clubbing provisions of Section 64.