Whether Moeny Sent By My Son Out Of Saving From Scholarship Taxable?

I have a joint A/C with my wife and son in a nationalised bank. My son is now studying in England with full scholarship. He sent me some money from his savings and I deposited the same in our joint account as we have no other account in any bank. I am a service holder and pay income tax regularly. My questions are, a) Is the amount sent from abroad will be the income of mine as we operating the joint a/c? b) Is the interest that will be generated from that amount taxable? My wife has no source of income and my son's only source of income is his scholarship in foreign money. Prodyut Biswas,Kolkata

You have not given the detail who is paying the scholarship . However , even if the same is being granted in India it is tax free receipt as per section 10(16) of the I T Act . If foreign company or university is giving the scholarship, even that will be tax free , because the wording in section 10(16) is " scholarships granted to meet the cost of education;". So saving out of such scholarship is also non taxable . Refer Madras High Court decision in case of CIT v. V.K. Balachandran [1984] 147 ITR 4 (Mad.) wherein it has been held

If scholarship is paid only for meeting the cost of education, the fact that the recipient does not spend the whole amount towards education or that he is able to save something out of it would not detract from the character of the payment being one for scholarship.

Read this posting for knowing more on taxation of scholarship Fellowship /Scholarship Is Exempt From Tax!

Therefore , money sent by your son to the joint account with you is non taxable in either your hand or your son’s hand .If your son declares it as gift to you, the said gift is also not taxable by virtue of section 56(2)(vi) of the I T Act . You are advised to read this posting :

As far as interest on the deposit is concerned, it is fully taxable whether in your hand or your son's hand. However, since your son is not earning any money in India except this interest, it will be beneficial for your son to declares the deposit out of his scholarship as his own so that interest up to basic exemption is not be taxable in his hand.

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Is Gift From Husband of My Wife's Sister To My Wife Taxable?

My wife's brother in law ( her sisters husbund ) was holding a flat since 1995 and sold in year 2007. He has paid the capital gain tax as applicable in this transection. Now he wants to gift the amount received net of capital gain tax to my wife. My questions, - Will the brother in law be taxed again for gifting this amount to my wife ? - Will my wife be taxed for receipt of such gift amount ? - Can this amount be gifted by my wife's sister to my wife ? My wife's sister is earning. In such case will my wife be taxed ? - What would be documentation for this transection ?Ritwij K, Pune

First of all , you should know that there is no Gift Tax Act. Now there is provision under section 56(2)(vi) of the I T Act which explicitly makes the gift receipt in certain specific condition and from specific persons "tax free" in the hand of receiver . Clause (a) of the section 56(2)(vi) states that gift receipt from relative is "tax free" in the hand of receiver of the gift. Then there is Explanation given under the said provision which defines the word "relative" . The said provision 56(2)(vi) with Explanation is as under

(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006, the whole of the aggregate value of such sum:
Provided that this clause shall not apply to any sum of money received

(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10;
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.
Explanation.For the purposes of this clause, relative means
(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi).]

It can be seen that as per Explanation to word"relative" , one of the person defined as relative is "Spouse of the person referred to in clauses (ii) to (vi) " . That covers " bother-in law " of your spouse . So any gift received from his known source of income is tax free in hand of both him and your wife.There is no need for answer to your other question as the first option of getting gift by your wife from brother in law is perfectly legal and without any problem. Remember ,however, it will be better if the gift deed is made in favour of your wife .Go ahead ,get the gift and enjoy it!
Have you read this ?

My father in law has a house in Delhi . He wants to transfer the house in my name. Is the rent taxable in my hand?

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Is Gift From Son Of My Wife's Sister Taxable?

Updated!

Whether my wife can claim exemption under gift tax if she receives gift of Rs 5 lakhs from her mother's sister's son. if it is to be taxed then at what rate.what is the procedure to be adopted. Saurabh, Gurgaon

Receipt of gift is tax free without any limitation if received from "relative". The word relative has been defined under Explanation given section 56(2)(vi) which is reproduced below:

Explanation.For the purposes of this clause, relative means

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) brother or sister of either of the parents of the individual;

(v) any lineal ascendant or descendant of the individual;

(vi) any lineal ascendant or descendant of the spouse of the individual;

(vii) spouse of the person referred to in clauses (ii) to (vi);

It means that if your wife receives gift of any amount from

1. You

2. Your brother or sister

3. Her brother or sister

4.Brother or sister of your or her parents.

5.Her lineal descendant or ascendant

6.Your lineal descendant or ascendant

7.Spouse of any body mentioned above.

It can be seen that son of sister of your wife does not fall with any of the relationship given above. therefore son of sister of your wife is not a relative of your wife for the purpose of section 56(2)(vi) of the I T Act. As such gift of Rs 50,000 is tax free only and any amount exceeding that is taxable under I T Act.

Tax rate applicable

The income will be added to your total income and taxed at the normal rate applicable in case of an individual.There no special tax rates for gifts.

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Is Gift From NRI Father-in-Law Tax Free!

Can my NRI father in law gift me money & is that money taxable?

Mandeep Kumar

Section 56(2)(v) deals with the taxability of gift receipt. It provides that gift exceeding Rs 50,000 in a year is taxable in the hands of receiver. However , there are some exceptions when any amount of gifts can be received without any liability of tax either in hand of payer or payee.The provision under section 56(2)(vi is given as under:

(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006, the whole of the aggregate value of such sum:

Provided that this clause shall not apply to any sum of money received

(a) from any relative; or

(b) on the occasion of the marriage of the individual; or

(c) under a will or by way of inheritance; or

(d) in contemplation of death of the payer; or

(e) from any local authority as defined in the Explanation to clause (20) of section 10; or

(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

(g) from any trust or institution registered under section 12AA.

The term " Relative" is defined under this provision only in following words :

Explanation.For the purposes of this clause, relative means

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) brother or sister of either of the parents of the individual;

(v) any lineal ascendant or descendant of the individual;

(vi) any lineal ascendant or descendant of the spouse of the individual;

(vii) spouse of the person referred to in clauses (ii) to (vi).

You can easily see that Father-in-Law does come under the definition. Therefore whatever be the gift amount from your NRI father-in-law , the whole amount of gift shall be free.

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Is Money Receipt From NRI Friend Taxable In India?

One of my friend is working in some other country and used to send some money from there in my salaried account in India on which he is already paying tax there.So will it going to be taxable for me as well. Sarika


If you receive any sum of money exceeding Rs 25,000 without any consideration after 1/4/2004 but before 1/4/2006 [After 1/4/2006, if the aggregate sum of money received exceeds Rs 50,000, such sum will be taxable] whether from resident or non-resident friends , is certainly taxable in your hands under section 56(2)(v) of the I T Act. Some of the important point regarding section 56(2)(v) are :

1. The sums of money received at the time your marriage is non taxable even if received from no-relatives including friends.
   
2. From 1/4/2006, if you receive gifts from many persons or friends without any occasion and aggregate of such gifts exceeds Rs 50,000 the whole of gift shall be taxable. For example , you received Rs 10,000 from eight friends on 1/9/2006, then for FY 2006-07, you will have to declare income of Rs 80,000 u/s 56(2)(vi) of the I T Act.
3. Section 56 does not distinguish between Indian money and foreign money. That is whether you receive the money within India or somebody sends money from abroad.
4. Gifts received from relatives and under certain other circumstances are tax free without any monetary ceiling which can be read here.
   

Therefore, if you have received money after 1/4/2004 from your non-resident friend , if not returned by you and sum exceeds Rs 25,000 , such money is taxable in your hand as per section 56(2(v) of the I T Act.

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Is Gift by HUF to Its Member Tax Free?

Can a HUF give gift of over 25,000 by cheque to one of its coparcners without attracting any gift tax liablity? Will the income generated from this gift attract clubbing in the hand of HUF file? rajeevgupta7@yahoo.com

The gift of Rs 25000 by one person to another person without consideration is tax free in hands of donee (person who received gift) provided total gift received in a year is less than Rs 50,000.This is as per section 56(2)(v) and 56(2)(vi) of the I T Act. Therefore , Rs 25,000 given by HUF to its coparcener is tax free if the coparcener .

Your second question that whether the income generated from such gift shall be clubbed in the hand of HUF is easy to answer. The clubbing provision u/s 64 is applicable to only .

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When GIFTS are Exempt from income tax ?

Gift of any amount received after 1.4.06 is exempt if received

1. From Relatives or ,

2. On the occasion of marriage or,

3. Under a WILL or,

4. By way of inheritance or,

5.In contemplation of Death.

6.From any local authority 7

7.From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or

8. from any trust or institution registered under section 12AA.

In all other cases, gift above Rs 25000 received from any person other than list of persons given above is taxable. However, from Asst Year 2007-08 ,it has been provided that receipt of gift exceeding Rs 50,000 in aggregate is taxable.Meaning thereby , a person can receive maximum Rs 25000 from one unrelated person and total receipt of gift in a year from all person can not exceed Rs 50,000.For example if Mr X receive RS 25000 each from Mr A , Mr B and Mr C . The total amount is Rs 75,000. Therefore from Asst Year 2007-08, tax free gift is only upto Rs 50,000 in aggregate . Mr X has to add in his taxable income Rs 25000 (75000- 50000)

So who are Relatives ?

1. Your spouse
2. Your brother or sister
3. Your spouse's brother or sister
4. Your parents' brother or sister
5. Your lineal ascendants or descendents
6. Your spouse's ascendants or descendents
7. Spouse of persons named in 2 to 6 above.

Follow these principal before accepting gifts ?

Remember, law is well settled that the donee has to prove Identification,genuineness of transaction and capacity of the donor

1. Always take gift by cheque or draft .

2.Get a gift deed mentioning the relationship.Its always better to mention PAN number of the Donor in the gift deed.

3.Its better if the donors' return , P &L account and balance sheet , if available , should also be kept ready .In case required , it should be submitted to A.O.

If you do that, gift can be enjoyed without any botheration in future.

Tags: Gift, Relative

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Enjoy The Gift! Gift Tax Act Is Dead Long Ago.

Does there arise a gift tax for A.Y-92-93,in respect of a quoted shares alloted to a major shareholder of a Ltd company 'X', by way of a family partition (where such shareholder is the member of the family that controls the closely held limited company 'X' )?

gspk@..mail.com

Gift Tax Act is abolished long ago. So no gift tax can be charged now. Even if during 1992-93 there was Gift Tax Act, there can not be any gift tax assessment on account of time limitation .The proceeding is barred now.

If you are asking whether the Gift in question can be treated as income , it can not be if the said gift was done in 1992-93 because no proceeding can be taken now under I T Act because of limitation rule.

On account of these reason , there is no reason to go into the merit of the transaction. Be happy and Enjoy the gift untouched by taxman.

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Don't worry, be happy!Receipt from NRI son is non taxable

Someone asked on this blog
My son an n r i sent monthly 450$ to his father(me)is it taxable to me as per i t rules ?

No , it is not taxable, as it does not fall within Income definition. At most it may be termed a Gift which is also not taxable.So, receive money from your son fearlessly , however if you are having income from other sources and filing return of income , it is better that you show this amount as tax free receipt in form of gift.

Also note that genuine gift was always tax free and now gift from relatives are made tax free expressly under the I T Act.

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I sold some shares gifted by my husband, but the A.O taxed my husband on those gains. Now the company annanoced Bonus.Will that also be clubbed ?

No, the Bonus received on the shares GIFTED to you by your husband can not be clubbed in his income because the bonus was never belonging to him.There are court ruling on this issue . You can refer
CIT vs M P Birla [1983] 142ITR377 [Bombay High Court]
CIT vs T Sarswathi 133 ITR 315.

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My father in law has a house in Delhi . He wants to transfer the house in my name. Is the rent taxable in my hand?

No , Rent is not taxable as your income if the transfer of the house was done without receiving the consideration......why? This is beacuse of clubbing provision in the I T Act .

Section 64 (vi) of the I T Act states:

In computing the total income of any individual, there shall be included all such income as arises directly or indirectly" to the sons wife, of such individual, from assets transferred directly or indirectly on or after the 1st day of June, 1973, to the sons wife by such individual otherwise than for adequate consideration;"


Hence , the income shall still be taxable in the hands of your father in law. You better get it transferred in your husbands ' name because in that case the Clubbing provision does not apply.

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My taxable income is Rs 2.2 Lakhs. If I gift Rs 20,000 to my son, who is a 23 yr old student, will my taxable income reduce by Rs 20,000 to Rs 2.0 Lak

No, There will not be any reduction. You will have to pay tax on 2.2 lac. Your sons receipt will be tax free.

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