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Tax implication of gift tax

Kanchan (Associate) (47 Points)

24 April 2014

Hi, Please advice about the tax implications for Rs.20lac transferred by mother to his son and then by son to his wife???

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(Guest)

The transfer itself would be exempt from tax in both cases as it is gift by a relative.

But when the 20 L would be invested by the wife eg in a FD, the interest income will be clubbed in the hands of the husband.[64(1)(iv) Income from assets transferred directly or indirectly to the spouse without adequate consideration]

Even if the mother transfers the amount directly to son's wife,the income on investment of the amount would be taxable in mother's hand[64(1)(vi)Income from the assets transferred to son’s wife.]

Income Tax Wala: (Fin. Expert) (Chartered Accountants) (2010 Points)
Replied 25 April 2014

Dear Kanchan

Madhvi is right that there is no gift tax will be levied on this transaction

but interest earned on amount so transferred will be taxed in the hands of mother only u/s 64 (1)(vi) because ultimately funds transferred by mother to sons wife.