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What will be the consequence in the following case ??

Abhishek Goel (CA Assistant) (59 Points)

08 January 2019

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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15 Replies

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 08 January 2019

it will be taxable in your assssement

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Girish Jain (150 Points)
Replied 08 January 2019

Section 61 of IT Act would apply and as deemed income holder, you would be taxed.

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Abhishek Goel (CA Assistant) (59 Points)
Replied 08 January 2019

If there is no retransfer and 7,50,000 remains intact with my mother.

Abhishek Goel (CA Assistant) (59 Points)
Replied 08 January 2019

If there is no retransfer and 7,50,000 remains intact with my mother.

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Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 08 January 2019

then till maturity, fd interest will be taxable in your hands

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Girish Jain (150 Points)
Replied 08 January 2019

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.

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 08 January 2019

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

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Abhishek Goel (CA Assistant) (59 Points)
Replied 08 January 2019

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.

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Girish Jain (150 Points)
Replied 08 January 2019

Yes you are right Giridhar, only income earned from Rs.7.5 lacs would be taxed, but in mothers hand.

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Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 08 January 2019

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.

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Girish Jain (150 Points)
Replied 08 January 2019

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).

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