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Tax saving by gifting to brother

Tilak (Software Engineer) (50 Points)

20 March 2012

Hi,

I want to do indirect tax saving by shifting some fund to family members.

My brother is 19yrs old (studying), and i plan to gift him some extra money that he will put in FD.

I have following queries

1. Is gift deed necessary ( I am planning to transfer fund with Net banking)? If yes, how to create gift deed.

2. Is Form 16 H necessary to avoid TDS reduction? Since he does not have any (taxable) income, only income will be through FD

3. What are the implications if he gives back all the money? Will it come under my tax assessment. If yes how to avoid.

Thanks a lot Sir,

Regards

Tilak

Regards

Tilak

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4 Replies

venkata narayana reddy m (ARTICLED STUDENT) (273 Points)
Replied 20 March 2012

Gifts received by Individua / HUF in excess of Rs.50000 is taxable under the head INCOME FROM OTHER SOURCES. Gift is in kind or cash.

But gifts received from Relatives is not taxable

Here Relative means

Gifts from these persons not taxabale

1. Father 2. mother 3. Brother 4. Sister 5. Wife's brother 6. Daughter 7. Sister Husband 8. Wife 9.Husband

10. Brother's wife 11. Son 12. Wife' sister 13. Grandson 14. Husband's sister 15.Husband's brother

16. Mother's sister 17. Mother's husband 18. Wife's brother's wife 19. Mother’s Sister's Husband

20. Father's brother's wife 21.Father’s Brother 22. Father's sister 23. Father’s Sister’s Husband Grand mother

24. Grand Father 25. Great grand mother 26. Great Grand Father 27. son's wife 28. Daughter’s Husband

29.wife's mother 30. Wife’s Father 31. Husband's mother 32. Husband’s Father 33. Husband's grand mother

34. Wife’s Grand Father 35. wife's grand mother 36. Husband’s Grand Father 37. Husband's great grand mother

38. Wife’s Great Grand Father 39.Wife's great grand mother 40.Husband’s Great Grand Father

41. Mother's brother's wife

42. Brother’s Wife

43.Husband's brother's wife

Gift deed is necessary

Shewta (Accountant) (117 Points)
Replied 22 March 2012

Mr. Venkata...!!!!

Thanks for sharing. It made me clear about the things reagarding gift. But what are the things which we should have to mention in gift deed. Plz let us know about the format and important thing to be include in deed.

meabhijit (Project Manager) (172 Points)
Replied 27 March 2012

Gift between relatives is tax free but the income generated on the gifted amount is clubbed with the donor income for taxation. This is called clubbing of income. So any interest generated from the amount you transfer will be clubbed with your income and taxed accordingly. You should deposit the money not in FD but PPF in his name so that the interest amount becomes tax free.