Income Tax on Gifts

 Income Tax on Gifts

-Dr. Lalit Kumar Setia

Are you planning to gift a relative,  to save income tax?

Yes, it is a good option to save income tax. In India, anyone can gift to others for saving taxes in his hands. The money given as a gift is not considered the income of the recipient if he is relative to the person giving the gift.

But it is required to remember that such amount will be clubbed in the taxable income of the person giving the gift as it will not be taxable in the hands of recipients.

For example, the taxable income of Mr. A is Rs. 10 Lacs and he gifted Rs. 2 Lacs to his daughter-in-law or his spouse. Will there be any tax savings?

Since the gift is given to a relative, it will not be taxable in the hands of the recipient, therefore it will not be clubbed in the income of Mr. A and his taxable income will remain Rs. 10 Lacs. There will be no tax implication of giving such a gift in the year in which it is given. But in the following year, the interest earned on such gifted money will be taxable in the hands of the recipient and not in the hands of Mr. A.

Never accept Cash Gift of money above Rs. 2 Lacs

The amount up to Rs. 2 Lacs can be accepted as a gift but the amount above Rs. 2 Lacs in Cash form, cannot be accepted as a gift. If a person accepts that he received an amount in cash as a gift from someone either relative or anybody, the income tax department may impose a penalty up to the amount received as a gift. 

Income tax on gifts received from persons other than relatives

The relatives can give gifts without any limit however the gift should be given either using cheque or electronic fund transfer and cash gifts should be avoided. 

But in case, gifts are given or received for other than relatives, then how to treat in the income tax return? Whether it is an income of the recipient or not?

A person who receives gifts of an amount up to Rs. fifty thousand is not taxable in his hands but if the amount becomes more than Rs. fifty thousand then the whole amount of gift will be taxable and included in income from other sources as per Section 56(2) (x) of the income tax act. 

For example, Mr. A received gifts from nonrelatives, Mr. B and Mr. C and the amount is Rs. 45000 then it will not be included in the taxable income however if the amount of gift is above Rs. 50000, then it will be included in the taxable income of Mr. A.

In case, a person is not including the income of gifts in taxable income in such circumstances, then it will be treated as Tax evasion. 

Who is relative and who is not relative for accepting gifts under the income tax act?

While accepting or giving the gift, the tax implications depend upon the relationship between the tax giver and tax recipient. The relatives cover mother, father, brother, sister, spouse, brother and sister of parents, brother and sister of parents in law, brother and sister os spouse, the person who is lineal ascendant or descendant of person or spouse, and also the spouse of the relatives mentioned as relative above.

It is worth mentioning that the person receiving any gift or giving any gift should maintain a record of it, justifying the source of money given as a gift to others.

It is found in many cases, the money which is not accounted as white money is given as a gift, and the person giving the such gift will be held responsible for it.

Are you interested in an Online Course related to Income Tax?:

1. https://smartinstituterls.blogspot.com/2022/12/income-tax-matters-in-government.html 

2. https://smartinstituterls.blogspot.com/2022/12/computation-of-income-tax-liability.html

 *Copyright © 2021 Dr. Lalit Kumar. All rights reserved. 

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. He completed his Doctorate in Commerce from Kurukshetra University Kurukshetra and MBA in Information Technology from GJU, Hisar. He also wrote two books, 15 research papers, and organized more than 200 Training Courses during his working period since 2006 in Haryana Institute of Public Administration, Gurugram. The article was firstly published on 18th October 2021, and last updated on 19th October 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

Read more content:

https://leavesofprogress.blogspot.com/2021/09/parking-of-funds-and-personal-ledger.html (Parking of Funds and Personal Ledger Account - PLA)

https://leavesofprogress.blogspot.com/2021/08/organizing-unorganized-sectors-of-india.html (Organizing Unorganized Sectors of India).

उपहारों पर आयकर

-डॉ. ललित कुमार सेतिया

क्या आप आयकर बचाने के लिए किसी रिश्तेदार को उपहार देने की योजना बना रहे हैं?

हां, इनकम टैक्स बचाने का यह एक अच्छा विकल्प है। भारत में, कोई भी अपने हाथों में कर बचाने के लिए दूसरों को उपहार दे सकता है। उपहार के रूप में दिए गए धन को प्राप्तकर्ता की आय नहीं माना जाता है यदि उसका उपहार देने वाले व्यक्ति के साथ पारिवारिक संबंध है।

लेकिन यह याद रखना आवश्यक है कि इस तरह की राशि को उपहार देने वाले व्यक्ति की कर योग्य आय में जोड़ा जाएगा क्योंकि यह प्राप्तकर्ताओं के हाथ में कर योग्य नहीं होगा।

रिश्तेदारों के अलावा अन्य व्यक्तियों से प्राप्त उपहारों पर आयकर

रिश्तेदार बिना किसी सीमा के उपहार दे सकते हैं हालांकि उपहार चेक या इलेक्ट्रॉनिक फंड ट्रांसफर का उपयोग करके दिया जाना चाहिए और नकद उपहार से बचना चाहिए।

लेकिन अगर रिश्तेदारों के अलावा किसी और के लिए उपहार दिया या प्राप्त किया जाता है, तो आयकर रिटर्न में कैसे व्यवहार किया जाए? यह प्राप्तकर्ता की आय है या नहीं?

एक व्यक्ति जो रुपये तक की राशि का उपहार प्राप्त करता है। उसके हाथ में पचास हजार कर योग्य नहीं है लेकिन अगर राशि रुपये से अधिक हो जाती है। पचास हजार तो उपहार की पूरी राशि कर योग्य होगी और आयकर अधिनियम की धारा 56(2) (x) के अनुसार अन्य स्रोतों से आय में शामिल होगी।

उदाहरण के लिए, मिस्टर ए को गैर-रिश्तेदारों, मिस्टर बी और मिस्टर सी से उपहार मिले और यह राशि रु। 45000 तो इसे कर योग्य आय में शामिल नहीं किया जाएगा, हालांकि यदि उपहार की राशि रुपये से ऊपर है। 50000, तो इसे श्री ए की कर योग्य आय में शामिल किया जाएगा।

यदि कोई व्यक्ति ऐसी परिस्थितियों में उपहार की आय को कर योग्य आय में शामिल नहीं करता है, तो इसे कर चोरी माना जाएगा।

आयकर अधिनियम के तहत उपहार स्वीकार करने के लिए कौन रिश्तेदार है और कौन रिश्तेदार नहीं है?

उपहार स्वीकार करते या देते समय, कर के निहितार्थ करदाता और कर प्राप्तकर्ता के बीच संबंधों पर निर्भर करते हैं। रिश्तेदार माता, पिता, भाई, बहन, पति या पत्नी, माता-पिता के भाई और बहन, माता-पिता के भाई और बहन, भाई और बहन ओएस पति या पत्नी, जो व्यक्ति या पति या पत्नी के वंशज या वंशज हैं, और पति या पत्नी को भी कवर करते हैं। उपरोक्त रिश्तेदार के रूप में उल्लिखित रिश्तेदारों की।

यह उल्लेखनीय है कि कोई भी उपहार प्राप्त करने वाले या कोई उपहार देने वाले व्यक्ति को दूसरों को उपहार के रूप में दिए गए धन के स्रोत को सही ठहराते हुए उसका रिकॉर्ड रखना चाहिए।

कई मामलों में ऐसा पाया जाता है कि जो पैसा सफेद धन के रूप में नहीं गिना जाता है उसे उपहार के रूप में दिया जाता है, ऐसा उपहार देने वाले व्यक्ति को इसके लिए जिम्मेदार माना जाएगा।

 *कॉपीराइट © 2021 डॉ. ललित कुमार। सर्वाधिकार सुरक्षित।

Read more content:

https://leavesofprogress.blogspot.com/2021/09/parking-of-funds-and-personal-ledger.html (Parking of Funds and Personal Ledger Account - PLA)

https://leavesofprogress.blogspot.com/2021/08/organizing-unorganized-sectors-of-india.html (Organizing Unorganized Sectors of India).

Income Tax Changes from FY 2021-22

Income Tax Changes from FY 2021-22

In last article, we learned how Fuel Taxation is being used to increase the collection of tax to meet the fiscal deficit. In the Financial Budget 2021, the income tax rates are not increased and the Government projects to have collection from disinvestment, GST, and Fuel Taxation. 

No Change in Income Tax Slabs:

The rates of income tax are same as earlier in both old tax regime and new tax regime. No changes are made.

Relaxation for filing of ITR for senior citizens above age of 75:

The senior citizens who are above the age of 75 and receiving income only from pension and interest as a source of income, will not require to file income tax return. However, for such relaxation it is the condition that their interest income should be from the same bank in which the amount of pension is deposited. It is worth to mention here that in such circumstances; the bank will deduct the tax deduction at source (TDS) as per the taxable liability of the senior citizen after keeping in mind the deductions u/s 80C to 80U and rebate of 87A. It means the filing of ITR will not be required because the tax liability already be deducted at TDS by the bank.

Pre-filling of ITR forms:

Like earlier, the 26AS tax credit statement data automatically pre-filled by the web-portal of income tax india efiling dot gov dot in. From April 1, 2021; the details of dividend, interest, and capital gains will be pre-filled so that the same cannot be concealed by the taxpayers. Similarly, the details of salary incomes, tax payments, TDS etc. will also be pre-filled on the basis of the information available with the income tax department. It is worth to mention here that the deductors including employers, banks, financial institutions etc. normally communicated the amount of TDS to the income tax department on monthly and quarterly basis; the same will be considered to pre-fill the information.

Interest on part of PF contributions which are exceeding Rs. 2.5 Lacs in a year; will be taxable:

From 1^st April, 2021 if there is interest income earned on the portion of PF contributions which are exceeding Rs. 2.5 Lacs in a year; will be taxable in the hands of recipients. This provision is applicable on all the three PF contributions including GPF, EPF, and PPF. Due to this provision, the high income citizens would like to make investments in NPS instead of PF after the amount be invested up to Rs. 2.5 Lacs in their PF accounts. (How Money Grows in NPS)

No TDS on dividend payments to Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (InvITs):

From the year 2020-21, the dividend distribution tax was abolished and the dividend income was made taxable in the hands of shareholders. From the year 2021-22, the dividend payments to REIT and InvITs will be exempt from TDS.

Incorporating Section 206AB for charging TDS on higher rate from the Non-filers of ITR:

The citizens who are still not filing income tax return (ITR), are required to pay more TDS on their incomes. The higher rate of TDS will be either 5% or twice the rate specified in the relevant provision of the Act. This is done to encourage citizens to file the income tax return (ITR).

Capital Gains Tax on returns of Unit Linked Insurance Plans (ULIPs):

The ULIPs issued on or after 01.02.2021 in which an individual is paying annual premium above Rs. 2.5 Lacs will be subject on Capital Gain Tax at the time of redemption.

Reduction in Last date for filing delayed ITR:

Up to 31st March, 2021; the last date for filing delayed ITR was 31^st March, on voluntarily basis; means the return of the FY 2019-20 can be filed up to 31^st March 2021 if delayed. But from FY 2021-22, the last date of filing delayed ITR will be 31^st December, on voluntary basis; means the return of FY 2020-21 can be filed up to 31^st December 2021 instead of 31^st March 2022. It is worth to mention here that u/s 234F, if an individual is filing ITR after the due date but before 31^st December; then maximum penalty is Rs. 5000 (Five Thousands). In case, anyone wants to revise the filed ITR, then it can be revised up to the end of Assessment Year.

How to know Income Tax Refund Status:

Now, it is very easy to view the income tax refund status, just login with your PAN Number and password on the website of incometax dot gov dot in and go to "My Account". Click the command "Refund/Demand Status". The portal will display the status with mode of payment by which it has been credited in your account. 

It is worth to mention here that the income tax refund comes within 20 - 45 days after processing of the income tax return (ITR) by Centralized Processing Centre (CPC), however, it is delayed in few circumstances:

If any query is raised by the Income Tax Department and the reply to that query took times from your side. In such cases, the refund is withheld by Income Tax Department for assessment and to clarify any mismatch between the details submitted by taxpayer and the details already available with the Income Tax Department. 

What can be done for getting delayed Income Tax Refund?

First of all, check your registered email whether there is any query pending from the Income Tax Department or not. If there is any query, then respond as per the directions provided in the email. 

In case, no such email is available, then check dashboard after logging into the account on incometax dot gov dot in. 

In case, the bank account details submitted by the taxpayer during filing ITR are wrong, then also the income tax refund is delayed. In such case, the taxpayer can update the banking details, to get the refund at the earliest. 

The income tax refund status can also be checked upon the website of NSDL. 

*Copyright © 2021 Dr. Lalit Kumar. 

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Tax Saving under Section 80C

Tax Saving under Section 80C

The Drawing and Disbursing Officers are responsible to deduct accurate amount of Tax Deduction at Source (TDS) from the salaries of the employees. Most of the employees ask DDOs to advise upon tax savings and each DDO before giving advice, should be clear the instruments, investments, payments associated with the section 80C. The ‘Professional Guidance’ webpage is providing full detail in simplest way for complete understanding of section 80C. The major deduction which attracts taxpayers is still under section 80C of Income Tax Act, however it is still restricted up to Rs. 1,50,000. The taxpayers invest a certain amount to claim this deduction and all insurance companies, financial companies, banking companies targets the taxpayers (individuals and Hindu Undivided Family – HUF) to attract them for their plans to claim deduction under section 80C. Which of the option is good for the taxpayers and why; that is still a matter of concern and every individual considers the pros and cons of each investment before making investment.

Tax Deduction under Section 80C

Options to select for claiming Deduction under Section 80C:

For claiming deduction under section 80C, the individual and HUF can consider various options and payments should be made up to 31^st March of the financial year.

An individual / HUF can take a life insurance policy (for self, spouse and children including annual plans, deferred annuity plans, and Unit Linked Insurance Plans - ULIP) and claim deduction on payment of its premium during the financial year. He can deposit amount in Provident Fund (Public Provident Fund, Recognized Provident Fund, Superannuation Fund), National Saving Certificate / Kisan Vikas Patra, Mutual Funds (Equity Linked Saving Schemes or Notified Pension Funds), UTI funds, specific Bank Fixed Deposits or bonds (infrastructure bonds, notified bonds of NABARD, Senior Citizen Saving Scheme, Five Years-Time Deposit with Post Office etc.) and other investments entitled to claim deduction under section 80C. Apart from it, the deduction can be claimed for payments of tuition fees of two children, repayment of housing loan (only principal component), stamp duty or registration charges paid for purchase or construction of residential house etc.

(a) Life Insurance Premium under Section 80C for Individuals and HUF:

If amount is paid for annuity plan of Life Insurance Policy, that can be claimed as a deduction under section 80C. Such premiums paid for self, spouse and children can be claimed under section 80C and the premium paid for policy of father, mother, or others cannot be claimed as deduction under section 80C.

Here the point is whether the amount received on maturity of the ULIP will be taxable in the year of receipt or not?

It depends upon the amount of premium and sum assured value of the policy. In case, the premium paid is less than 10% of the sum assured value of the policy then amount received on maturity of the policy will be exempt under section 10 (10D), otherwise it will be taxable.

(b) Employee’s Provident Fund Investments under Section 80C for Individuals and HUF:

The salaried people usually pay a part of their monthly salary as a contribution to Employee’s Provident Fund. Such contributions in Provident Fund Investments are eligible to claim deduction under section 80C. The employers also deposit equal amount of contribution in the account of employee’s provident fund.

Here the point is, whether the contribution of employer and interest earned on provident fund during the year is taxable in the hands of employee or not?

The employee and employer’s contribution to provident fund accumulate a corpus and interest is earned upon the same. Such interest earned up to 9.5% is not taxable in the hands of the employee. The interest earned above the limit of 9.5% per annum will be taxable. Further, if the employer contributes more than 12% of employee’s salary in employee’s Provident Fund Account, then the excess will be taxable in the hands of employee.

What will happen if an employee decides to contribute more than 12% in his provident fund?

If an employee contributes more than 12% of his salary in provident fund, then such contribution is known as Voluntary Provident Fund (VPF) and such contribution is also eligible for deduction under section 80C.

Whether the interest earned on maturity of provident fund is taxable or not?

The interest earned and maturity amount is exempt.

(c) Public Provident Fund Investment under Section 80C for Individuals and HUF:

An individual or HUF can open a Public Provident Fund (PPF) Account in post office or bank and the PPF account has a lock-in period of 15 years however, partial withdrawals can be made after 7 years of opening the account. The minimum amount required to be deposited in PPF account is Rs. 500 per year and the maximum amount can be deposited up to Rs. 1,50,000.

Here the point is whether the interest earned on PPF account is taxable or not?

The banks and post office provide interest on PPF account on annual basis means it is compounded yearly. It is exempt in the hands of recipient.

(d) Sukanya Samriddhi Yojana (SSY) investment under Section 80C:

An individual only if he / she is one of the parents or legal guardian of one or two girl children with age up to 10 years, can open Sukanya Samriddhi Yojana Account in post office or bank and contribution in this account can be made up to Rs. 1,50,000 per year. The lock-in period of the account is up to the age of 21 years of the girl child and the amount to be deposited in this account is for 15 years thereafter amount is not deposited in this account. Such contribution can be claimed as deduction under section 80C.

Here the point is whether the interest earned on SSY account is taxable or not?

The interest earned on SSY account is compounded annually and it is exempt in the hands of recipient. The interest rate on SSY account is usually declared higher than the PPF account’s interest rate. Both the interest rates are revised every year by the Government.

To continue the understanding, please go through the next part: Tax Deduction under Section80C.

 *Copyright © 2018 Dr. Lalit Kumar. All rights reserved.

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Implications of forming HUF on Income tax

Implications of forming HUF on Income tax

While computing the income tax on the income of an individual, first Rs. 2,50,000 are exempt, and such limit of income exempt from tax is known as basic exemption limit (BEL). The exemption is also available in the case of Hindu Undivided Family (HUF). The family members together can form HUF and take separate PAN for it. In such case, the deductions are also applicable on both HUF and individual accounts of family members. In case of deduction u/s 80C, apart from all family members, the HUF can also claim the deduction and save the taxes.

How HUF works in saving taxes on incomes of family members?

All family members form a Hindu Undivided Family (HUF) and took a separate PAN number for it. The HUF is formed as a joint business by family members. The members can take a salary from the revenues earned by HUF instead of their contribution to the business and commercial operations of HUF. The business starts earning revenues and paying salaries to the family members. To claim deduction u/s 80C, the HUF’s PAN can be used to take the insurance cover of the life of members. After forming the HUF, the income from house property is treated as income of HUF instead of any family member.

Assets of Hindu Undivided Family (HUF)

Whenever any gift is received or property is acquired as ancestral property or acquired by the contribution of all family members, it becomes the property of HUF and the rent from such property is considered as income of HUF instead of the income of family members. The common pool of assets whenever generates any income that is quantified as the income of HUF.

Why do people hesitate to form HUF for saving taxes?

Once the HUF is formed and assets are purchased jointly in the name of HUF. The common property is managed by all family members and due to the maintenance of equal rights of property, each family member took less interest to spend upon assets, and at the time of dissolution of HUF, there are a large number of conflicts among the family members to get equal right in the revenues generated from the business. At the time of dissolution, when assets are distributed among the family members, then such income is quantified as the individual income of each family member, leading to more tax liability. 

*Copyright © 2018 Dr. Lalit Kumar. All rights reserved.