A relative desires to reward money to me. What are the earnings tax implications?

Q: My grandmother, 85 needs to reward me a sure sum of cash in money. Can she reward me in money? If sure, is there any restrict for money presents beneath the earnings tax or some other regulation? Do I’ve to pay any tax on this reward? – Abhishek Ray

Answer: There is not any restrict as much as which an individual may give a present to a different particular person both beneath the earnings tax legal guidelines or some other regulation. Likewise, there’s additionally no restrict as much as which an individual may give reward in money. However, there’s a restrict of ₹2 lakh past which one can not settle for money from any particular person for any transaction together with reward on one event. So you can’t settle for money reward past 2 lakhs out of your grandmother at one time.

In case the quantity which you grandmother intend to present you is greater than 2 lakhs please perform the transaction by banking channels with the intention to adjust to the regulation. Moreover, it’s advisable to not settle for any reward in money to keep away from any complication in future from tax division.

In case your earnings tax return is chosen for detailed scrutiny, your grandmother might should show the supply of such cash if the quantity concerned is large failing which the identical will get taxed in your fingers at flat fee of 60% along with entailing penalty additionally.

The presents are taxable within the fingers of recipient beneath Section 56(2)(x) however reward from sure specified relations are exterior the scope of this provision. Grandparents are coated inside the definition of specified relations, so reward acquired out of your grandmother will likely be absolutely exempt in your hand with none higher restrict. Likewise, your grandmother additionally doesn’t have any tax legal responsibility in respect of this transaction.

The author is a tax and investments professional and could be reached at jainabalwant@gmail.com

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