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Will your gift be taxed?

By RelaxWithTax
April 12, 2006 08:49 IST
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You have a question about house rent allowance, medical allowance, or even a general tax query.

Here's where we step in with our experts, Relax With Tax.

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My dad's brother wants to gift me a property.

Will I need to show that as income?

Will my uncle have to pay gift tax?

- Vishwas Langer

As the gift being made is in kind and as a relative is making it, there would be no impact of Gift Tax on such a transaction.

Do read 'Points to note on gift tax' which appears at the end of this column.

I gave Rs 3,00,000 to my wife as a gift. She invested this amount in the post office monthly income scheme and earns Rs 2,000 per month as interest.

Does this interest income need to be clubbed with my income for computing income tax? Or will it be taxed in her hands?

Also, do the same principles apply if the recipient of the gift is my mother instead of my wife?

- Viswanath K V

This interest income of Rs 2,000 will be clubbed with your income for computing income tax.

If the recipient of the gift is your mother, then clubbing provisions will not apply. But care needs to be taken that the gift is irrevocable and you should not have any future interest in the same.

Points to note on gift tax

It is true that gifts above Rs 25,000 will be taxed. But a gift from a blood relative (lineal ascendant or descendant) is exempt from tax, irrespective of the amount.

This would include gifts to spouses, parents, children as well as:
~ Brother or sister (and their spouse)
~ Brother or sister of the spouse of the individual (person making the gift)
~ Brother or sister of either of the parents of the individual
~ Any lineal ascendant or descendant (and their spouses) of the spouse of the individual

To play safe, if the amount is huge, do ensure a proper gift deed is executed.

A gift deed is a legal document that states how much you received, from whom and when.

The person making the gift and the one receiving must both sign the gift deed. Do get it registered with the related stamp duty.

To see the other queries answered, read Tax benefits on education fees.

Got a question for Relax With Tax? Please write to us!

Note: Questions may be edited for brevity. Due to the tremendous response, all queries will not be answered.

Disclaimer: While efforts have been made to ensure the accuracy of the information provided in the content, or the author shall not be held responsible for any loss caused to any person whatsoever who accesses or uses or is supplied with the content (consisting of articles and information).

Illustration: Dominic Xavier

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