Go AD-Free with CAclubindia Pro and Daily Mobile Updates. Subscribe Now!

Implication of gift

manisha (cs) (1118 Points)

19 December 2016

individual gift 1 lac to father and his father earned interest 10000 from such gift plz state tax implicatiin on individual , his father and who wil pay tax on 10000
another ques wat if i replace in above ques father and insert frnd

Reply
Follow
Share

10 Replies

Sanjay S (Chartered Accountant) (1375 Points)
Replied 19 December 2016

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.

1 Like

manisha (cs) (1118 Points)
Replied 19 December 2016

if father is replace by spouse then interest incomr wil be taxed in giver hand as per clubbing provision. is it true

s.v.s manikanta (Student CA IPC / IPCC) (31 Points)
Replied 19 December 2016

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

1 Like

Sandeep Dharar (Business ) (18797 Points)
Replied 19 December 2016

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

manisha (cs) (1118 Points)
Replied 19 December 2016

individual wil not get tax emption on gift as per it act gift is not allowed as dedcution is ir true

Sanjay S (Chartered Accountant) (1375 Points)
Replied 19 December 2016

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)

1 Like

manisha (cs) (1118 Points)
Replied 19 December 2016

thanks impressive ans

manisha (cs) (1118 Points)
Replied 19 December 2016

how you write bold letter in phone do ur pgn hav special feature that allow you to write bold lettr

Sanjay S (Chartered Accountant) (1375 Points)
Replied 19 December 2016

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

Vishal Goel (Chartered Accountant) (1693 Points)
Replied 21 December 2016

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.

1 Like