If I deposit 7,50,000 in my mother's account (dependant) and makes a FD @ 6.5% of them. After maturity of FD I retransfer the principle amount to my account.
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What will be the consequence in the following case ??
Replies (15)
it will be taxable in your assssement
Section 61 of IT Act would apply and as deemed income holder, you would be taxed.
If there is no retransfer and 7,50,000 remains intact with my mother.
If there is no retransfer and 7,50,000 remains intact with my mother.
then till maturity, fd interest will be taxable in your hands
Abhishek in that case, it would be treated as Gift to mother under section 56(2) of IT Act and income would be taxed under mothers hand.
but gifts are exempt from tax for close relatives. mother and son being relatives so i believe it wont be taxable. only interest component wud get assessed in sons hands
Sir it means there will be no tax u/s 56(2) on gift amount i.e. 7,50,000 as tax has already been paid and for irrevocable transfer section 62 gets invoked where income earned from investment on 7,50,000 will be taxable in the hands of transferee i.e. my mother. Kindly confirm my interpretation.
Yes you are right Giridhar, only income earned from Rs.7.5 lacs would be taxed, but in mothers hand.
but mother has not invested in fd. son has transferred to mothers account without consideration and invested in fd. so interest will get taxed in sons hand.
Yes, abhishek. Section 62 is not applicable in your case as mother is going to have the money as Gift from son and Sec 56(2) invokes and income from same is taxed under 56(1).
ohhk.. because I'm not transferring an asset thats why sec 62 wont be applicable. Got it Sir.. Thank you
Sir I'm transferring only money and my mother is investing that amount in FD, technically..
Yes, You are right abhishek.
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