Gift obtained or given to family. How earnings tax is calculated?

Can a present be given any variety of occasions within the monetary 12 months or it needs to be given solely as soon as? Am I required to have any documentation executed for the reward if I’m giving it to my dad and mom? Can I declare any deduction for such items made to my dad and mom? My dad and mom don’t have PAN as they don’t have any earnings.

Answer: There are not any restrictions as to the variety of occasions one could make a present throughout a 12 months both to the identical individual or to completely different individuals. Each such transaction shall be handled as separate reward. 

Preferably you must perform the reward transaction via banking channel to have correct proof and path of transactions. However, if you’re making a present in money, every transaction of money reward needs to be lower than two lakhs else the recipient might must face penalty proceedings for accepting reward in money for 2 lakhs or extra. 

In order to finish the transaction of reward, it needs to be accepted by the recipient throughout the life time of the donor as per the Indian Contract Act, so it’s advisable to organize some doc evidencing the transaction which is signed by you in addition to your dad and mom. There are not any tax advantages out there to you in respect of such items. 

Though items obtained from some specified family like dad and mom and kids should not handled as earnings of the recipient however the tax division might enquire into your supply for making such reward, failing which the identical could also be taxed at flat fee of 60% within the arms of your dad and mom. There isn’t any drawback even when your dad and mom don’t have PAN with a view to obtain the reward.

Balwant Jain is a tax and funding skilled and be reached on jainbalwant@gmail.com and at @jainbalwant on his twitter deal with.

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