Dear Vivek, Plz. note that Gift Tax has long been abolished by Govt. of India.
The only point is, if some one is receiving cash amount as gift (even if the amount is transferred thru cheque/bank draft), certain relationships r defined in the IT act from where the gift `ll be tax free. For other (rwlationship or even for friends), the gift receiver `ll have to pay Tax on gift amount by showing the gift as other source of income if total gift amount in a FY is more than 50K Rs.
Here in this query, as the parents r giving gift to their major son, & this relationship qualifies for tax free gifting, no tax liability is there on the son or parents.
Dear Vivek, I`m not an expert but anyway thanks for ur gesture.
Now to illustrate relationships that qualified for tax free gifting, for sake of simplicity, I assume u r receiving the gift. Now u can receive gifts from following persons.
1. ur own parents
2. ur paternal uncles & their spouses
3. ur maternal uncles & their spouses
3. ur brothers & their spouses
4. ur sisters & their spouses
5. ur wife`s parents & wife`s relative from point 2 to 4 as stated above.
6. ur major children & their spouses
The catch - husband or wife can`t gift each other & Father & mother - in - laws can`t gift to their daughther- in - laws & parents to their minor children. As these relationships r not covered & any gifting `ll invite clubbing provisions of section 64.
Dear Vivek, I forget to post some added info for ur 49K figure.
In a FY, if u do a smart work by getting gifts from several friends & each gift is of value 49K. My dear friend, u r in trouble as the 50K limit is the composite limit & the moment it crosses (49+49+49K.... = more than 50K), the full amount `ll be treated as ur income from other sources & u `ll have to pay tax on it as per ur marginal tax rate.
Many thanks for your detailed reply. More queries to quiz you :
- Please clear the diference between Major children and Minor children.
- your mentioned points are valid when I am at receivg end , do they are also valid when I am at GIVING end. eg: If my brother`s spouse gives me 1 lac rupee gift per year , will it be taxable.
- "The catch - husband or wife can`t gift each other ". It is very strange.
Myself and my wife is having a joint account in which I am the earning member and we both use the account very frequently through our separate debit card, so now.... how the GIFT TAX will be imposed on my wife.
Dear Vivek, First of all I`m sorry as i forget to post in prev. post -
1. Ur paternal as well as maternal aunts & there spouses (of course for ur wife side too) r also eligible for taxfree gifting.
Now the answer for ur current post.
1. children above the age of 18 r major & below that age r minor, simple isn`t it.
2. ur brother`s wife can gift u 1L Rs. every year tax free for u, the only condition, her own income sources justifies such gifts year after year. If u r giving gifts plz. note to relationshos where u r nephew (niece for female giver) to the receiver, such gift `ll be taxable in the hands of recipients. In other words, u can`t gift to ur Uncles & Aunts & their spouses.
3. Strange but it`s true & it`s done to plug the loophole that every husband/wife `ll gift from higher income earner to lowe or zero income earner & consequently income earned from the gifted amount `ll attract low or zero tax. For example, ur wife is a house wife & u r in 30% Tax slab. Now if u invest under ur own name for a 1L bank FD, the interest `ll be taxable @ 30.9% but if u invest the same FD under ur wife`s name, the interest `ll be taxfree if gifting is allowed between husband & wife which is not the case. I hope u got it.
4. Having joint account is no problem, till u r using it for normal day to day expenses. The problem starts when u use the amount of this joint bank account to invest under ur wife`s name. As she doesn`t has any income to bring her money into that joint bank acct. So in this case clubbing provisons `ll be applicable & the taxable income earned from such investments `ll be added to ur income.
| NIFTY 
