Cash gift to daughter in law

Question BankCategory: Income TaxCash gift to daughter in law
Kollipara sundaraiah asked 1 year ago

One of female I.t. assess cash gift to daughter in law rs:1,50,000/- through on cash mode in  f.y .19-20.
Question:
Cash gift to daughter in law gift transaction taxable or exempt .if taxable gift amount tax applicable for donor or donee in I.t. act. sec 64 clubbing of income applicable and calculate producer.

1 Answers
Rabindra answered 1 year ago

As per Section 56(2) of Income tax Act, Gift from relative is exempt. Hence if any person receives any gift from his relative then the sum so received is exempt from tax in the hands of receiver. As per section 56(2) following person are included in the definition of relative for this purpose:-
In case of an individual

  1. Spouse of the individual
  2. Brother or sister of the individual
  3. Brother or sister of the spouse of the individual
  4. Brother or sister of either of the parents of the individual
  5. Any lineal ascendant or descendant of the individual
  6. Any lineal ascendant or descendant of the spouse of the individual
  7. Spouse of the person referred to in above points

In case of HUF – Any member of the HUF
 
But following points are to be kept in mind in respect of gift:-
 
For Receiver:-
As per section 56(2) Receiver is not liable to pay tax on sum received as gift from relative. But as per section 269S, no person shall receive an amount of INR 2 Lakhs or more in CASH in respect of a single transaction from a person in a day. Receiver need to comply with the provisions of section 269ST, otherwise penalty (equal to the value of transaction) may be imposed. 
For payer:-
Gift is given from the money left after paying tax hence the gifted sum will not be taxed again in the hands of payer. For example, I earned Rs. 100000/- and paid tax Rs. 30000/- and now I am left with Rs. 70000/- Then I gifted Rs. 50000/- to my daughter-in-law from this left out money. Hence this gift value of Rs. 50000/- is already taxed in payer’s hand hence it will not be taxed again.
But as per section 64, if any assets is transferred directly or indirectly to your daughter in-law by you for inadequate consideration then any income from such assets transferred is clubbed in the hands of the transferor. In your question, cash gift to daughter-in-law is Rs. 150000/- which is paid without any adequate consideration but still this is exempt in the hands of receiver as per section 56(2). And this sum of Rs. 150000/- is already taxed in the hands of payer hence not taxable again.  But if your daughter-in-law earn any income by investing this money like FD, Share market or any other source , then the income so earned by your daughter in law will be clubbed in the your income. This will be treated as your income and it will be taxed in your hand and not in the hands of your daughter-in-law. 

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