My daughter is learning in US. Can I save tax by transferring some cash to her?
3 min readMy daughter is 21 years previous and is financially depending on me. She has no revenue of her personal. She is learning in USA since 2021 and thus is an NRI. She has a financial savings checking account in India. She additionally has PAN and Aadhaar. I perceive NRIs can not avail deduction below part 80C for tax financial savings. I might wish to switch a few of my revenue to her financial savings checking account and spend money on her identify and thru that account to save lots of on my taxable revenue and tax outgo. What are the avenues accessible in order that she has zero tax legal responsibility and I’m able to cut back my tax outgo to the utmost by means of her?
No. Your understanding just isn’t appropriate about eligibility of Non Residents to assert deductions below Section 80 C. Yes, there are some restriction on non resident making investments in sure merchandise eligible for part 80C however deduction below Section 80C may be claimed in respect of different eligible gadgets. For instance, a non-resident just isn’t entitled to open a contemporary PPF account in addition to spend money on NSC, Senior Citizen scheme and put up workplace month-to-month scheme. So besides these restriction, your daughter can spend money on every other tax saving avenues accessible below Section 80 C like ELSS, ULIPs of mutual funds, fee of life insurance coverage premium if she has a life insurance coverage coverage or spend money on tax saving FD, compensation of dwelling mortgage and many others.
Please observe that simply by transferring revenue out of your account to her saving checking account, you can’t keep away from the tax on the revenue acquired by you and on which you might be in any other case liable to pay tax. Yes. You can reward any sum to your daughter which can neither entice any tax legal responsibility nor any clubbing provisions. Any revenue which she earns on cash gifted by you may be taxable in her fingers in India. As a non-resident she is entitled to fundamental exemption restrict of two.50 lakhs and might avail deduction as much as Rs. 1.50 lakh below Section 80 C, you’ll be able to plan making items to her in such a approach in order to make sure the revenue of as much as 4 lakhs yearly to her.
Please observe the revenue which she earned in India could also be subjected to deduction of tax at supply even when she might not have any tax legal responsibility. Moreover, the identical revenue might get taxed in US as she is tax resident of US. Please observe that the transaction of reward from you will not be tax exempt for her in US. So please get the tax implications, of she receiving items from you in addition to Indian revenue, as per US regulation evaluated earlier than you truly embark on this transaction.
Balwant Jain is a tax and funding skilled and may be reached on jainbalwant@gmail.com and @jainbalwant on Twitter
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