Gift
AJAY SRIVASTVA
(Querist) 19 November 2011
This query is : Resolved
can mother in law can make a cash gift of 500,000/- to her daughter in law,plz answer me as per income tax law whether mother in law comes in the defination of relative or not
Sankaranarayanan
(Expert) 19 November 2011
The New Rule
The change in the rule related to gifts says that the receiver has to pay tax for receiving any gift valued at Rs.50,000 and more. The ‘any gift’ clause means that not only cash but all gifts of any value. So if someone receives a gift of a house worth Rs.30 lakhs, then he/she is automatically in the highest income bracket and has to pay 30% + surcharge on value of the house as tax (close to Rs.10 lakhs in this case).
The rule thus effectively prevents money laundering in the guise of high value gifts.
Which Donors’ Gifts are Exempt
Gifts received From Relatives
As per the Income tax act, the Gifts received from any of your relatives are fully exempt from tax. Whether you are received the gifts as Cash, Cheque or any goods. You are not liable to pay the tax for these gifts. Here the “relatives” term defines by the Income Tax act as follows :
Spouse of the individual
Brother or sister of the individual
Brother or sister of the spouse of the individual
Brother or sister of either of the parents of the individual
Any lineal ascendant or descendant of the individual
Any lineal ascendant or descendant of the spouse of the individual,Spouse of the person referred to in clauses (ii) to (vi).
For example if you are receiving gift of Rs.100000 from your uncle ( your mother’s brother), it is fully exempt from the Tax. Whenever you get the gifts please apply the relations in the above list to ascertain whether you are liable to pay any tax for the received gift.
Gifts received From Non-Relatives
Here non-relatives means anyone who doesn’t come under the above mentioned relation for you. In this case you are tax exempt up to maximum of Rs.50000 for a financial year. If you receive the gift worth more than Rs.50000, you are liable to pay the tax what ever you received excess of the limit. This rule applies when the gift is a sum of money, whether in cash, by way of cheque or a bank draft. If any other kinds of gifts are fully exempt from the tax.
For example you are receiving a gift of Company Shares from one of your team mate in your company. It is not coming under the tax liability. But, when you are receiving a gift of Rs.100000 (cheque) for the best performing in your company (not a bonus), Rs.50000 is liable to pay tax.
Marriage Gifts
One very happy feature of the provision of taxation of gifts is that any gift received from any person on the occasion of the marriage of the gift’s recipient would not be liable to income tax. There is no monetary limit attached to this exemption.
Special Tax Exempt gifts
The following list of gifts are fully exempted from Tax whether the it is received as Cash, or any other form of the material doesn’t affect the exemption.
Gift received under a Will or by way of inheritance
Gift in contemplation of death of the donor;Gift from any local authority
Gift from any fund or foundation or university or other educational institution or hospital or any trust or any institution referred to in Section 10(23C)
Gift from any trust or institution, which is registered as a public charitable trust or institution under Section 12AA
I hope this blog provides you enough information how to calculate the tax for your gifts. So, when ever you are receiving the gifts, please be careful if you are liable to pay the tax. Thanks for reading this post!!!
if you have any doubts, please post in the comments area so that I can answers all the questions.
Rajeev Kumar
(Expert) 19 November 2011
Mr. Narayanan has explained in details of your query reply. I do agree with him
A V Vishal
(Expert) 19 November 2011
The MIL can gift the sum to her DIL and the donee has no liabilty of tax.
Biswanath Roy
(Expert) 19 November 2011
Yes Mother-in-law can give gift to her daughter in law Rs.5,00,0oo/- in cash as relative to the donee. Liability of tax depends upon the declaration of donor and the relationship between the donor and donee.
prabhakar singh
(Expert) 20 November 2011
The gift is permissible and not taxable in hands of donee daughter in law as donor mother in law is lineal ancestor of her spouse husband as mother.
Shailesh Kr. Shah
(Expert) 20 November 2011
Section 56(2)(vii) of the Income Tax Act exempts tax on gift to dil by mil.
Vineet
(Expert) 26 November 2011
Gift from MIL per se is not taxable either in hands of donor or donee.
BUT......
1. CASH Gift - may be suspected by ITO regarding source. So the MIL should be in position to explain the source otherwise the tax liability may arise under section 68 (unexplained cash credit)
2. If the DIL investets the said gifted sum, any income arising out of the same shall be clubbed with income of MIL under clubbing provisions of IT Act.
