Hi,
I get my compensation after tds & have all my tax returns for all years. In financial year 2010-11 I transferred INR 5 lakh to my parents as they lived in different city & my father was about to retire from a private job. The amount transferred was bank transfer & nothing in cash.
My parents made Fixed deposit so that they can run house from the interest. As the interest amount from FDs was always less within exemption they never filed return. My father’s income was very low to be taxable.
In March 2018 my parents received a letter from IT dept citing section 147 of IT act asking to assess-reassess the IT return.
Our understanding is gift/money transferred between blood relation is exempt from tax & so were thinking to give this response to IT department.
But some people have scared my parents saying that penalty could be more than original amount of 5lakh & they will get sorted with IT dept for some extra money.
Can you confirm that money transferred to parents is exempt from tax return & any interest is their income & not clubbed with mine?
Also, do we require a gift deed even when transferring by bank transfer from son to father?
Please advise as we are in big tension & my parents are worried as people scare them to get some money to sort this out.
Thanks
CAclubindia
