Gift to Family members – 3 awesome tips to save income tax legally

POSTED BY manish ON February 12, 2015 COMMENTS (521)

Most of the people in India try to save income tax by investing the money in their spouse, children and parents name. We are going to explore this topic more deeper and help you understand the exact rules applicable and how you can save more tax legally, by gifting money to your family members.

Majority of people, just transfer the money to their family member account and invest that money, thinking that they will not be paying tax on that amount and it’s a smart way of gifting the money and avoid paying the tax. But that’s not correct. I have already written in detail about what is gift tax and certain exemptions when one don’t have to pay any tax on gifts received.

gift tax rules in India

What most of the people do in real life is that, they just transfer the money to their family member bank account and invest that money in their name, assuming that by default it will help them in saving tax, because they have gifted away that money and because their family member has income below exemption limit, they also don’t have to pay any tax. However, it’s not that simple.

Now, let’s understand the tax implications of various people involved when a gift is given and what is the right way to save tax by gifting money.

Let’s take an example – where husband earns Rs 10 lacs per annum, gifts Rs. 1 lakh out of that to his wife, who is a homemaker. Wife, then invests this Rs 1 lac in a Bank FD at the rate of say 10% interest per annum and earns Rs 10,000 as income.

This transaction has three parts and the tax implications as follows

  • Tax Implication on GIVER (husband) for the amount gifted
  • Tax Implication on receiver (Wife) for the amount received
  • Tax Implication on the income earned, when the gifted money is invested.

Tax Implication on GIVER (husband) for the amount gifted

Let’s first talk about the tax implication for the person giving the gift.

The person, who gives the gift can never claim any income tax deduction or exemption from his/her income. Most of the people confuse the entire gifting implication and assume that the money which they have gifted to somebody will be reduced from their total taxable income and they have to pay tax only on the balance income. But that is not correct.

In the above example, the husband earns Rs 10 lacs per annum and should ideally pay tax on that full amount after deducting any income tax exemption they get from various sections like 80C and others.

How most of the people think?

Now husband can argue that the Rs. 1 lac which was gifted to his wife should be reduced from his total taxable income and he should be paying taxes only on Rs. 9 lacs. But this is simply not allowed!

Because – if this is allowed, then everyone will gift all their salary or business income to wife or parents and no one will pay tax at all, because they don’t have any income now as the entire income is gifted. That does not make any logical sense.

So in the above example, husband has to pay tax on his income of Rs 10 lacs subject to all the benefits as available to him under various sections of the IT act and let’s say that his total tax after all tax deductions (80C) comes to Rs. 75000/- and his post-tax income is Rs. 9.25 lacs. He can gift whatever he wants out of this post-tax income.

Tax Implication on Reciever (Wife) for the amount received

Now let’s take the tax implication for wife, who got the money in our example. Will she pay income tax on this gift received or not?

The answer is NO

Because this is a gift from her husband, who comes under the specified list of relatives who are exempt under the income tax act from gift tax liability. If she had got this 1 lacs from her friend or some random person, who is unrelated to her. In that case, this 1 lac would be considered her income for the year and taxed in her hands, but here she will not pay any tax on this 1 lac.

Below is the list of relations from whom if one gets any gift, they don’t need to pay any tax.

  • Your spouse
  • Your brother or sister
  • Brother or sister of your spouse
  • Brother or sister of either of your parents
  • Any of your lineal ascendants or descendants
  • Any lineal ascendant or descendant of your spouse
  • Spouse of the persons referred in above points

So the point is that, if one gets a gift from close family members, like spouse, parents, siblings etc, the receiver does not pay any income tax on the money received.

Tax Implication on the income earned, when the gifted money is invested

Now the tricky part comes in.

What happens when the gifted money is invested in products like FD’s or shares? Let’s say that the wife invests this Rs. 1 lacs in a bank FD and earns an interest @10% annually, ie Rs 10,000.

Now who will pay the tax on this interest of Rs 10,000?

Husband or Wife?

I know most of the people will think that its wife, because once she gets the gift, now its her money and she is 100% owner of that money and any income generated from that should also be her own income and she should pay the income tax on that amount. So here in this case, if wife does not have any other income apart from this Rs 10,000 , then her total income for the year will be Rs 10,000 only and as its lower than the exemption limit, so she will not be paying any tax and won’t be required to file any income tax returns.

However in real life, this is not how it works.

In this case, IT department clearly knows that people will gift the money to their spouse who does not have any income, so that the whole income generated become’s tax-free. To combat this, there is something called as Income Clubbing provisions, which adds the income of one person in other income in certain cases, and that will apply in this case.

So in the above example, this interest income of Rs. 10,000 would not go tax-free and will be clubbed with husband’s income and he has to pay tax based as per the applicable tax slab.

So if, husband earned Rs 10 lacs a year, now this Rs 10,000 will be his additional income making his total yearly income as Rs 10.1 lacs.

But Income earned from the income earned is not clubbed

One interesting point to note is that any further income generated from the income is not clubbed further and that will be 100% income of the person who got the gift.

So in above example, when wife gets Rs 1 lacs as gift, and earns Rs 10,000 as the income, that Rs 10,000 will be clubbed with income of husband, but when this Rs 10,000 is further invested into FD again and earns Rs 1,000 income, this time – it will be wife’s income and not husband.

So now, how you can apply this rule in real life? Here is a tip !

Let’s say you have Rs 10 lacs with you. If you invest this money in your name, you will earn Rs 1 lac as income from it and pay tax on it, but next time again when you invest this 1 lac, you will earn Rs 10,000 and then again have to pay tax on it because it will be your own income.

What is the alternative way ?

What you can do here is that, you can invest Rs. 10 Lakhs in your wife’s name and earn an interest of Rs. 1 lac. This Rs. 1,00,000 will be clubbed in your income for the computation of income tax; which was going to happen anyways. however, when your wife further invests this 1

However, when your wife further invests this 1 lac in another FD and earns Rs. 10,000 (assuming 10% interest) as interest on it, this time it will be considered as her income and will not be clubbed with your income. Assuming husband in 30% tax bracket, it’s a saving of Rs 3,000. Might look small, but its one of the ways to save the tax by Rs 3,000 in a legal way.

The image below shows you the rules and how the tax implication will apply in various cases explained above

 income tax on gifted money

3 tricks to save more tax legally by investing in family members name?

Now you are clear about the tax implication on person giving the gift, on person who is taking the gift and on the income generated from the investment done by the gifted money.

Now let’s see some things, which an investor can do to legally save tax in a more smart manner by involving their family members and that too in a 100% legal manner.

Trick #1 – Invest the gifting money into tax-exempt instruments 

Clubbing provisions will not apply when the gifted money is invested in any investment option which are tax exempt by default.

For example – rather than a normal FD, if the money is invested in shares of a listed company and sold after 1 yr or an ELSS mutual fund, and sold after 3 yrs lock in period, then in that case the profits can be clubbed with husband income because by default the income earned from these instruments is tax-free as long-term capital gains are tax exempt.

So if husband has Rs 10 lacs in hand to invest, they can invest this Rs 10 lacs in wife name in shares of listed company, ELSS mutual funds etc, and earn a non-taxable interest and then later wife can invest the earned income anywhere she wants and that will be totally her income.

Trick #2 – Invest money in your parents name

You can save taxes by gifting money or by giving loans to your parents or in-laws because clubbing provisions does not apply in these cases. This is because any income generated on the gifted or loaned money to parents is purely parents income and will be taxed in their hands only.

Let’s see an example.

Assume that you have Rs 40 lacs in your hand which you want to invest and your father and mother are both senior citizen and have no income from any source. Now what you can do is, gift Rs 20 lacs to each parent and let it get invested in a bank FD at an interest rate of 10% (just an assumption)

Now both of them will get 2 lacs as the interest income individually and this is their only income in a year and will be below the exemption limit (Rs 3 lacs for senior citizens) . So there won’t be any income tax to be paid by them.

This way you have invested Rs 40 lacs in family name itself with ZERO income tax.

On the other hand if this 40 lacs was invested in FD on a main bread-winner name who is into 30% bracket, he would have paid 30% income tax on 4 lacs of interest, which is Rs 1.2 lacs. This whole 1.2 lacs is saved.

tax saving by investing in parents name

Even if parents are having additional source of income, it’s still beneficial to gift the money to them as it would lower the income tax outgo, because of the lower slab rates and applicable exemption limit.

You can apply the same logic and invest in property in parents name and let the income come to them and enjoy the tax-free income subject to exemption limits.

Trick #3 – Invest money on Major Children Name

In the same way, even the money gifted to major children (above 18 yrs) will not be clubbed in your hand. So in case you have children who are 18 years or older who are either studying or earning at a lower tax slab than you, then gifting your surplus money and investing in their name will neither attract gift tax nor clubbing of income will apply.

Income earned out of investments made by your major Children out of the gifts given by you will be taxed in their hands only.

This is really a great thing because if you are going to pay for some upcoming children education goal or marriage goal, then instead of investing the money in your name and funding the goal later, why not just gift the money to the child and invest it in their name itself. When the goal arrives, the money can then be used, but for years there will be no tax liability (or lower tax) and you will save a good amount of income tax.

You may even consider giving interest-free loans to your children as it is lawful and can help you save you more taxes. However when the children are minor then clubbing provision will attract except in cases where the income is earned by the child due to his or her skill or talent.

Plan your Income Tax with help of a CA

There are lots of ways one can save income tax by restructuring their investments in family members name. Generally people do not have much time to plan all this and for years they pay higher income tax and never optimize it. If you really want to work on this. I suggest hire a good CA for his consultancy services. This can be your family CA or some friend if you want or some external person whom you can trust.

Let me know what new ideas are coming to your mind right now after reading this article? What are your views on this? Please share it on comments section.

This article is guest post by Rishabh Parakh, a Chartered Accountant by Profession & Founder Director of Money Plant Consulting, which provides services related to income tax filing, scrutiny cases and various other CA related services with operations in Pune, Mumbai and expanding to other regions.
Invest in Mutual Funds
Start investing in mutual funds with quality advice and monitoring support by Jagoinvestor Team. We build the portfolio as per your financial goals and your risk appetite.


Open FREE Account
Financial Planning Service
Avail financial planning services from Jagoinvestor Team starting just Rs 10,000. Plan your financial goals with a robust portfolio which creates quality wealth over long term.


Get FREE Intro Call

521 replies on this article “Gift to Family members – 3 awesome tips to save income tax legally”

  1. Girish S says:

    I have some queries.
    1. Father in law invested mony on my wifes name : It might be mature in this year,
    2. I transffered mony to wifes a/c for RD deduction. Since 3 years, (RD is 12 months)
    3. All Matured RD’s invested in FD
    4. On some RD/Seving interest bank deducted TDS but not filed any IT Return
    5. Filled form 15 G for tax exception
    6. If I would like to file retrun for F.Y. 2016-17 what is the procedure, how shall I fille IT?

    1. Hi Girish S

      This query belongs to CA domain, hence we are not the right people to comment on this issue.

      I suggest you get in touch with a CA for this in your city.

      We also have a CA partner incase you want to explore that, Just fill in your details here and they will give you a complimentary call back

      https://www.jagoinvestor.com/pro

      Manish

  2. Girish S says:

    Hi Manish
    I read you valuable article. Thanks for your guidance.

    1. Thanks for your comment Girish S

  3. Devit Patel says:

    recently my spouse declared that she have total saved amount of @ 200000 ,she saved this money from every month expenditures which I gave her,I am salary person, pl help me how to deal with this cash available with her.

    1. Nothing special to be done here. Just ask her to deposit in her bank account saying that its saved over the years. No issue will be there !

  4. Seerat says:

    Hi,
    My mother has been saving her money from many years wich she received from gifts and that amount is below the exemption limit and now she has deposited it in her own account.Will that money be clubbed in her husband’s income or not?

    1. No I dont think so .. It will be treated as her income only .

  5. Anand says:

    Can we take a loan from family member at a certain interest rate and duration for repaying the existing home loan from bank and still claim IT exemption under Sec 24 for the interest paid to the relative ?

    1. If its a HOME LOAN , then YES , Else no

  6. Nagaraj says:

    Hi Manish,

    Request you to help me with below scenario.

    I transferred INR 9 lakh to my mother, and she did a fixed deposit. I am clear with the fact that gifted amount and interest earned on FD are exempt from income tax.

    While filing my mother’s IT Return, where should I mention Rs. 9 lakh? Should it be mentioned in
    “Exempt income only for reporting purpose” under “Taxed Paid And Verification” Tab of income tax return?

    I want to file my mother’s income tax return due to high value transaction, and balance in bank account, so that there won’t be any notices from IT department in future.

    Thank you very much!

    Regards,
    Raj

    1. Hi Nagaraj

      This query belongs to CA domain, hence we are not the right people to comment on this issue.

      I suggest you get in touch with a CA for this in your city.

      We also have a CA partner incase you want to explore that, Just fill in your details here and they will give you a complimentary call back

      https://www.jagoinvestor.com/pro

      Manish

  7. ANAND says:

    My mother and me are JOINT owners(equal share of 20+20 lakhs each)of a flat, purchased in 2011(single, common saledeed).Now we are selling a vacant site.in which we both, along with 2 other brothers are having 1/4 share each.Each of the 4 sellers will get a Capital Gain of 30 lakhs from this sale .To get exemption from Capital Gains Tax, (1) I want to give my mother 20Lakhs,and get HER share of property in the flat, transfered to my name,— HOW should I go about this—By way of gift deed/ Release deed or a regular saledeed. (2) The remaining 10 Lakhs I want to put in REC cap.Gain Bondsfor a peroid of 3 yrs. Is it ok?

  8. Gaurang says:

    Hi Manish,
    Need your clarification on my understanding:

    One thing is clear that gifting doesn’t lower your taxes currently, it just helps lower taxes which would be generated out of investment you make with that money. E.g. if you investing in FD, better invest on spouse or parents name so tax arising is tax free in case of parents, and income generated out of this interest is tax free in case of spouse.

    But if I just invest in instruments which are tax-exempt e.g. stocks/MFs/PPF, how does this gifting help lower my tax further?

      1. Gaurang says:

        Thanks Manish.

        Firstly, investing 10L ro 40L in a tax-unfriendly instrument like FD is not an awesome idea in first place from a financial adviser’s point of view. There are much better safer investment options like liquid funds for better tax handling and returns.

        Secondly, on 10L of investment, tax savings is Rs. 3000 which is 0.3%, that is too after 2 years of maturity of 2 FDs. And if you take current scenario of 7.5% return on FD, tax savings after gifting and all is Rs. 1680. I think it’s peanuts in terms of savings on tax when you are dealing in tens of lakhs of investment. Scale it down to 2L or 5L and you will be spending more on your CA than tax you would save :).

        Thirdly, money received back from parents in case of their death is tax free, but interest will be taxable again.

        Overall I believe gifting isn’t great way to lower your taxes, neither it deserves going through amount of complexities it involves as you can see. It again helps only in case of FDs kind of instruments which are not great way to invest in anyway.

        So keep it simple, spend more energy in efficient ways to invest your money rather focusing on nitty-gritty of going through gifting process. This is the reason saving tax through gifting isn’t popular.

        1. I understand that at times the gifting is not the best thing . I just wanted to share the RULES and nothing else here 🙂

          Thanks for sharing those examples and workings . It makes sense !

  9. Anjan says:

    Hi Manish,

    Trick #2 – Invest money in your parents name

    I would like to further understand how this works. Let’s say my parents earned 2 Lacs interest out of my gifted money. How can I claim the principal+interest back at the end of the tenure? Assuming my parents don’t need the money, can they simply gift it back to me again? Won’t this raise flags with the IT dept or are such things usually ignored?

    1. From what I understand and what my CA had told me. Gifting money from Major child -> Parents or Parents -> Major children will not be taxed and also the clubbing will not apply. It will surely raise the flag if you do give and back game many times or in a short period itself, like if you give it in 2015 and take it back in 2016 . Then it clearly looks like gaming the system.

      But I might have to check this with my CA once. Let me check

      Manish

      1. Hi Anjan

        I just checked it, CA says that legally there is no issue . I mean YES, you can do it . But still there might be enquiry and if questions asked, you should be able to courageous enough to handle the queries and answer why you did it and be firm that its within the legal framework. The tax department can not make you pay any tax based on this, but has authority to raise queries.

        As I had said, if you do it once in a while , you can expect no eyebrows raised, but it you make it a regular affair, then it can raise an alarm.

        Manish

        1. Anjan says:

          Thanks a lot Manish for taking the time to clarify this. Once in a while is fine with me 🙂

          1. Glad to know that Anjan ..

  10. Praveen says:

    Hi. Need your advise on the following 2 scenario
    I gift my wife 1lakh. She invests in shares and earns 10k. I know the gain of 10k shall be clubbed with my income. Now 2 following scenario-
    1. She invests all the amount balance in the account i.e. 110000 in the shared again and earns 10k. Which income on the above is clubbed and which is not? Is it direct weighted average calculation?
    2. . She invests all the amount balance in the account i.e. 110000 in the shared again and loses 5k. Then how to calculate clubbed income? How tAx shall be treated?
    Please advice.
    Thanks a lot.

    1. Praveen says:

      Sorry. Please read 5k as 15k in 2nd scenario.

    2. Only the returns on the returns part will be treated her own. Means if she invests 1.1 lacs and she earns 10% , it would be 11k income, but 1k income has come out of the 10k return, so 1k will be her own , but 10k again will be clubbed into husband income

      Manish

  11. Parul says:

    I sould like consultation for planning and documentation of gift. Property in in indian being gifted by relative .

    1. Thanks for your comment Parul

  12. Anand says:

    Hi,
    In the example mentioned for Trick#2, when an amount greater than 50k (say 3L) is gifted to each parent in a year, is the amount not taxable from receiver side? Please clarify
    Thanks

  13. Umesh says:

    Hi,
    Needed your expert advise.
    1. Suppose I gift money (post taxation) to my Mother who is 73 yrs old, and if she deposits in an FD, the interest earnings I guess will not be taxable if its within her non taxable limit which is around 3lakhs.
    2. When I transfer the money to my Mother, shld I have to follow any legalities like make a gift deed/get it registered etc. to ensure that in future, the earnings plus principle can be claimed by myself only
    3. In the FD, to again avoid taxation, is it better if I be a nominee or a joint account holder
    Your advice would be very helpful,
    Regards,
    Umesh

    1. 1. Thats correct

      2. No

      3. FD taxation cant be avoided.

  14. Yogesh says:

    Dear Sir,
    I am having NRE FD currently which will mature in Nov-2016.It was started when I was having NRI Status. I have converted my NRE Account to Saving Account in Jun-2016 as I have permanently shifted to India.
    1. WilI have to pay tax on NRE FD when it gets mature in Nov-2016. If Yes what is a way to save tax on this maturing FD?
    2. Bank said I can submit Form 15G for above FD. Can I submit Form 15G to save FD Tax?(My Indian income for current year lies between 5-10L/A)
    3. Do I need to report Interest Earning on above FD while filling Tax return for next financial year ?

    Thanks,
    Yogesh

    1. Hi Yogesh

      This query belongs to CA domain, hence we are not the right people to comment on this issue.

      I suggest you get in touch with a CA for this in your city.

      We also have a CA partner incase you want to explore that, Just fill in your details here and they will give you a complimentary call back

      https://www.jagoinvestor.com/solutions/ca-services

      Manish

  15. Nitin says:

    i have gifted 1 laks to my mother who is below 60 years and have no other income. my father is in 30% slab. so income earned from gifted 1 laks is added in my fathers income or mothers income.

    1. No , it will be mothers income and hence no tax !

  16. Hi Manish,

    I am giving 10k per month to my parents. They dont have earning resources and my father age is above 60.

    Just want to know can i take tax benefit out of it. If yes, please let me know the section name.

    1. sachin says:

      I want to give 73000 rs every moth to my parents if my preants invest it in to fd or rd it is club with my income or their income
      please clarify

      1. It will not be clubbed in your income !

      2. Sachin says:

        I am in 30 %bracket after tax cutting salary credited my account can i transfer every month 73000 rs to my father ac directly through neft then he can either do rd or td on his name interest earn by him club with my income is there is rule min amount tranfer to father any tax issues for me ?

        1. The income earned by interest on the FD from your father will not be clubbed in your income. You can do that

          1. sachin says:

            sir,
            thanks for information
            I have to do any paper work for transfer money to my father .
            can I transfer to his bank account directly

            sachin

            1. JUst transfer directly online. Thts all !

    2. No you cant

      Just that your parents dont have to pay income tax on that amount

  17. Arnab says:

    My father (A senior citizen in 10% tax bracket) gifted Rs. 5 Lakh to my daughter (1 year old) from his corpus. I made FD of the same in my daughter’s name.
    Does the income generated out of this FD get clubbed to my income ( i am in 30% bracket)?

    1. NO , I hope the money did not come to your account, because if it did, then how will you prove that it was not meant for you !

  18. Boopathi says:

    I’ve a question.

    Instead of my father gifting (transferring) money to his wife (to avoid income clubbing by FD interest), what if he transfers the gift to me and then I gift the same to my mother (no income clubbing for me).

    Is it acceptable ?? Any income clubbing to my father or to me ??

    1. No , this kind of circular arrangement is not allowed. Note that at the end if its clear that the amount is transferred like this, then the tax authorities will put a penalty.

  19. Adi says:

    I am 18yrs old and studying in College . I have no source of income. My grandmother’s sister’s son gifts me Rs 3 Lakhs for my education. Do I have to pay any tax?

  20. Padmanaban says:

    Sir,

    I am a senior citizen and I would like to gift my son a sizable amount from my own savings . Whether I should inform the Income Tax Department at the time of transferring the amount to my son’s account. What is the procedure to inform this kind of action to IT Dept. Further, my son is employed in a foreign country where also he is paying Income Tax out of his earnings. He is also having just Rs. 1L in his FD in India. He is also filing Nil IT returns in India every year. In these circumstances, whether I can gift some amount to him. If so, what will be the repercussions in filing my IT return. Pl. explain in detail.

    1. You can directly do it, You dont have to notify anyone about this. The amount you give will not attract tax for your son !

      1. Padmanaban says:

        Thanks for your reply.

      2. KundanBharti says:

        Hi, this 1 lakh will be considered as *foreign* income in his foreign country and depending on the tax laws of that country it may or may not be tax exempted. Please ask him to consider local tax laws of that country.

        As an example, long term capital gains are tax exepmted in India however if you are a US tax resident, it becomes fully taxable there and you are supposed to pay tax on this income in US.

  21. Enbee says:

    Thanks for a very informative and well written article.

    May I seek clarification on a sticky point?

    I have gifted an FD in my minor son’s name and have been paying tax on the interest earned thereof u/s 64.
    After my son turns 18, do I continue to club the FD interest income under my name, or can my son include the FD interest under his name?

    In other words, am I freed from clubbing provisions of a gift given to a minor when that minor turns major?

    1. Yes, once you son is major, you dont have to pay tax on the interest part !

      1. Enbee says:

        Thank You Manishji!

  22. Kavitha says:

    Very nice article, was very helpful. The diagrams made it all the more clear. Thank you Mr. Manish

    1. Glad to know that Kavitha ..

  23. Anita says:

    Just wanted to thank you for a clear and lucidly written article . The illustrations are a bonus.

    1. Thanks for your comment Anita

  24. Ram says:

    Hi need a clarification with regard to ” gifting ” – I am a senior Citizen and my wife is also above 60 , If I sell a property worth 50 Lakhs, May I gift that value to my wife ? It is allowed ? if so what will happen to Capital Gains Tax component ? who will pay that . Kindly clarify

    1. Clubbing rules applies incase of spouse, so you cant save any tax by gifting to wife

  25. Niks says:

    Hi, so if I transferred money to my parents .. The income generated from it by parents will be taxable or exempted if applicable…

    Can I get that money back without being taxable.. And what about the income earned by parents ..can it also be transferred?

    1. Yes, that also can be transferred .

  26. Raj says:

    Sir, I as a major children of my father still lie in the lower tax bracket but my father does not.
    So, he can gift/ loan(interest free) me some money that I can invest to get some return while still remaining at the lowest tax slab.
    Now, when the investment matures, can I ‘re-gift’ the principal along with the return to my father? Because as far I perceive we both have just mutually gifted our major child and parents, our relatives.
    Thanks!

    1. Yes you can do that

      No tax will be applicable

  27. ABRAR says:

    Me and my wife both are NRIs. Iam on employment out of INDIA, My wife is a Housewife. I already have a Residential House in India in my name. Wife does not have any property in her name.

    1] If I buy a commercial property in my name and give it on rent. Then the Rental income will be taxed on me.

    2] If I buy a Commercial property in my wife’s name and give it on rent. Then the Rental Income will be taxed in my name?

    3] If I give her the money in INDIA and she buys a Commercial property in her name and give it on rent. then the Rental Income will be taxed in my name?

    4] If I give the the money out of India and she transfers the Money to India and buy a Commercial Property in her name and give it on rent. Then the Rental Income will not be taxed as she does not have any other property in her name?

    Is my understanding correct in all 4 cases above?

  28. Gopalreddy says:

    Thank you mr.Manish
    Gopalreddy n

  29. Shiva says:

    Hi

    If I transfer say 20 lacs to my mother who is 80 years and 15 lacs to my just major daughter. There is no income tax liability for me, as per your article.? correct?

    If there is no income tax liability, does this gift to my mother and major daughter be registered, or it can be done just like that….pls advise

    Thanks

    Shiv

    1. Where is it mentioned that the given has no income tax liability? Only the person who is getting does not have to pay the tax on that. The giver cant save the tax by giving money

    2. anantharaman says:

      The amount of money transferred cannot be deducted from your income. But the interest/income earned out of the transferred amount is . This is what i understand from the above

  30. Gopalreddy says:

    If I gift Rs.100,000 to my wife into her PPF account, can she claim tax exemption u/s 80c as she herself is a tax payer?

  31. jeetendra says:

    Dear sir

    What if I got the gift money from my father in law & I will not invests it ,Instead of that I will spend it in other things.

    so it will taxable or not

    1. No it wont be taxable !

  32. Satatkhare says:

    Dear Sir,
    I had transfer Approx 1.5Lacs to my wife account.
    Should i take advantage of gift.
    Can claim of refund during IT Return.
    Regard’s
    Satat Khare

    1. Giver can never get an advantage by giving gift !

      1. Satat says:

        Dear manoj ji.
        One more question.
        2 lakh for purchase a home is also tax expected other than 1.5 lakh 80c and 50k nps.
        If yes than can file refund.
        Regards
        Satat khare
        09671209424

        1. Hi Satat

          I am not clear on what is your question. Please repeat it with more clarity

          Manish

      2. Satat says:

        Dear Sir,
        Pls confirm 2 lakh for purchase a home(1st time buyer) is also tax expected other than 1.5 lakh 80c and 50k nps.
        If yes than can file refund.
        Regards
        Satat khare
        09671209424

        1. I am not sure of that !

  33. birsingh says:

    sir, my son in law died in the road accident-he was working in an industrial unit. he was 29 years and my daughter is house wife and she is having a female baby of 1 1/3 year only. the company employees contributed about 15 lacs of rupee by way of donations from their salaries to give my daughter for bringing up of my grand daughter and their livilihood from the interest the amount contributed. and has given a letter also in this context. my query is whether
    this amount will be treated as income or gift under donation
    whether it is taxable or exempted under some section of income tax.
    if taxable what is the tax amount and how can be saved.
    my daughter house wife and not able to work.

    I request you to kindly guide in this issue.
    moreover I am a senior citizen of 77 years of age.I do not how long will i survive

    your guidance will go a long way to help me and relive me from pressure -will it be possible please

    1. Actually a CA will be able to guide you on this. I am not eligible to answer this .

  34. Rajendra says:

    Can HUF entity gift to his married children?

  35. Rajendra says:

    If I gift my married daughter one lac and she invests it in PPF, will the interest earned by her be clubbed with my incomeincome?

    1. If she is major , then it will counted as her income

  36. Chauhan says:

    As you said if the spouse reinvests the “earned” income (1lac on 10lac), its goes into her tax slab. But what if she reinvests the whole amount? 11lac in FD? How would the tax work then? Will the clubbing still apply?

    1. Then “income part” will be taxed by her, rest from the original doner !

  37. MAYANK says:

    what will be tax implication if a member of huf gift to his/her HUF? is there clubbing provision applicable?

    1. Hi MAYANK

      A CA is more qualified to answer you query, hence I suggest better get in touch one.

      We are not right people to talk on this

      Manish

  38. Pramathesh says:

    Hi Manishji,
    Perhaps the best article i have seen on this forum! Especially 425 comments so far, amazing, and perhaps i am writing 426th one!
    In one of your answers, you mentioned that being a joint holder in FD, which was made from funds given to parent, would not attract any tax for the major child. Just want to re-confirm if this is true.
    Also, my mama (maternal uncle) has a few FDs, and he has made me the secondary holder on those FDs. Some of those FDs I have gifted him to take care in his old age and some are his own funds.
    How will the taxation work on the principal and income generated from those FDs
    1. Any gift tax, my mama or I need to pay on the transferred principal?
    2. Any tax I need to pay on interest earned from the FDs that I have gifted?
    3. Any tax I need to pay on interest earned from FDs not gifted by me, due to having secondary account holding?

    1. Pramathesh

      1. No

      2. Once you have gifted it, you are out of the scene, now your MAMA will have to pay them if his income is above the exemption limit

      3. No

  39. Jyoti says:

    Hi . Your article is very clear. However just to be sure can you please clarify if my understanding is correct below.

    1. If I transfer a large sum say 40lacs to my mother’s account, and she invests the amount in FD, I think the tax on the interest generated by the invested amount will have to be paid by my mother and not by me right? Also for her (my mother), I think there will not be any tax on the gift principal of 50lacs correct?

    2. Will the above questions have same answers if the money is transferred by my husband to my mother . i.e. he transfers 40 lacs to his mother in law. So he doesn’t pay any tax. Mother in law only pays tax on the interest on FD and not on Principal. Correct?

    Thanks again

    1. 1. Yes, thats correct

      2. No , mother in law will not come into that list of “relative”

      Manish

      1. Jyoti says:

        Hi Manish: Thanks for your reply. However with regards to point no 2 your article says
        Trick #2 – Invest money in your parents name

        You can save taxes by gifting money or by giving loans to your parents or in-laws because clubbing provisions does not apply in these cases

        Here it mentions in-laws too. What does that mean?

        1. When I say In-laws, its referring that the spouse can use the same thing for her/his parents.

  40. Mohit says:

    great article.. i have a query,in the third trick
    my mother is the sole earner in my family. the tax saving and everything is done by me. so after saving tax in sec 80cc and further in nps.. the remaining amount less yearly expenses is transferred in my account as gift and it is deposited in fd. i am 20 years old and have no income will that amount be taxable under IT. or the income earned on fd will it be clubbed with my mother’s income..

    1. It will not be considered as your income, but any interest earned on FD will be your income, but because I think it will not cross the exemption limit of 2.5 lacs, you dont have to pay tax on that too !

  41. Bala says:

    I transfer 20 lakh to my son Account on April from my nre account.
    Will he pay income tax?

    1. No he wont ! . its a gift !

      1. Bala says:

        Thanks.
        Kindly advise us how to invest wisely .

  42. Kunal says:

    Hi Manish,

    Is there any upper ceiling on amount that can be gifted to parents in any financial year?

    Thanks

    1. No , there is no upper ceiling !

  43. harish says:

    very good information would like to ask that my wife ( home maker ) earned fd intrest10443 and tds deducted 1044 @10% against the gift of 2 lac from me .

    can we claim tds deducted and fd interest 10443 to add in my taxable incomes from other sources and to revise return for AY 2014-15
    kindly advice

  44. Lokesh says:

    Hi Manish,
    Nice Information. I need one clarification.
    I am planning to invest in shares 1 lak to my wife name .. She is house wife. mostly futures and options .. if she get money from that.. how much tax she have to pay ? or i have to pay ? or upto 3 laks income there is no tax ? please clarify.

    Thanks in Advance.
    Lokesh

    1. She dont have to pay on getting the money. But on the income you have to pay if any !

      1. Lokesh says:

        Thnaks for reply Manish…
        On the income means ..that 1 lak money i have to pay ? what i am giving to her.. correct ?

  45. Ashish says:

    Great Article!!!
    I have a query.
    My father is working while my mother is a housewife. If I transfer 1 lakh to my mother and she invests in FD to earn 10k, then would this income be clubbed with my father’s income and he has to pay tax on 10k?
    or
    will it be considered as my mother’s own income and she doesn’t need to pay tax?

    1. It will be your mother income only ! and she wont have to pay tax

  46. Kanhaiya says:

    Just a small clarification. I will be getting superannuation and want to transfer around 20 lac out of my retirement benefits in the name of my wife. This will be by way of bank FD. whether the income from interest on FD will be taxed in the hands of my wife or it will be treated as my income

    1. It will be treated as your income only as per clubbing rules !

  47. George says:

    Sir,
    Any reinvestment scheme available on short time property capital gain?
    Is Short time capital gain is absolutely taxable?

    1. Yes, its fully taxable

  48. George says:

    Dear Manish,
    Is Capital gain gifted to Parents, exempted from Tax.?

      1. George says:

        Sir,
        Any reinvestment scheme available on short time property capital gain?

  49. vanita says:

    HI MANISH,

    I M VANITA, AS I M WORKING WOMEN. MY SALARY IS RS. 20000/- P.M. LAST YEAR MY HUSBAND OPEN MY A/C IN POST OFFICE WITH ‘X’ LACS AMOUNT. IS IT TAXABLE? I HV TO SHOWN IN I.T. RETURN?

  50. Parameshwar says:

    very nice article ..its really helps me to clear doubts.
    Thanks

    1. Glad to know that Parameshwar ..

  51. sanjet says:

    Can dadi gift 1.5lakh to his grand daughter in ssa ac is the income taxable on maturity

  52. tanuj says:

    Hello,

    If I borrow 1lakh from my mother and invest in FD or shares . Does my mother will be exempt from this 1 lakh and also adding this amount will not cross the income tax limit of mine. Is it possible?

    1. The giver never saves the tax, Its from their post tax income !

      1. tanuj says:

        So how can this trick 3 can be used and avail benefit?

  53. Vnayak says:

    Hi all!
    My daughter having salary income intends to gift gift my wife with say 200000/ rupees. my wife being housewife with no source of income, invests the gifted amount towards an fd in bank. Can she make my daughter as the joint hoder for this fd, where she (my wife) shall be the first name holder?

    1. YEs she can do that !

      1. Vnayak says:

        Thank you Manish.

  54. Sachin says:

    Thanks Manish,

    Very helpful information.
    1.If your brother lives in your parents house & wants to pay off your share before selling that property. What are the tax implications of that?
    2.If your brother gifts you money volunterily. Will the interest income still be clubbed into his income?

    Thanks,

    Sachin

    1. 1. Thats complicated, better hire a good property lawyer on this issue

      2. No, clubbing does not apply between brothers

  55. Rohit says:

    Thanks for the great article, very informative!!

    I invest money in my parents name. I invest 30000 per month in my fathers name and same amount in my mothers name. I am currently doing this in cash. I have created a gift deed on a plain paper indicating the amount provided to parents in a financial year. My atm transactions also show the required cash withdrawl. Do you think its fine approach. PLease share your suggestions.

  56. Sachin says:

    Thanks for the wonderful article. Pls advise me on one point. I sold a property, paid capital gains tax and income tax on the amount received after sale and out of the remaining tax paid money, gifted some amount to my wife because I wanted her to be individual or joint owner of certain prerented properties we planned to buy.
    Now she and me have jointly bought 2 properties, from where monthly rental is coming, will I be liable for tax implication on this total rent, even though she is jt owner and half rent goes to her, and even though I have paid cap gains tax and income tax and then paid/transferred/gifted money out of that tax paid money to her.
    I have to buy some more properties, should I t then treat the earlier transfer and future transfer money to her as a loan , on which she can pay me interest yearly, on which i should pay income tax or should I transfer money to my daughters and later they can gift it to her, will their gifting it to their mother save me from clubbing of income and will she then be liable/be able to make use of tax chart for calculating the income tax to be paid by her
    We are senior citizens and I thought it would be a nice way to make her an individual rightful owner and also save tax from the rental earned if I gifted tax paid money to her

    1. Hi Sachin

      A CA is more qualified to answer you query, hence I suggest better get in touch one.

      We are not right people to talk on this

      Manish

  57. GIRISH says:

    I gift a sum of money to my major daughter.She is entitled to deal with the same in any manner.Can she gift the entire/part of the same to her mother i.e. my wife?
    Whether my wife will become complete owner of such amount gifted by the daughter?

    1. No , it does not work this way . This cyclicle arrangement will not work !

  58. Ajinkya says:

    Hello Manish,

    Very useful read

    If my total gross income post tax deduction is around 4.4 lakhs and i have to pay around 23K as tax.
    i have already exhausted my 1.5l 80C

    1.Under which clause should i mention my money gift to parents
    2.What amount you suggest to optimally recover 23K

    Thanks

    1. Hi Ajinkya

      A CA is more qualified to answer you query, hence I suggest better get in touch one.

      We are not right people to talk on this

      Manish

  59. Rajeev Bhalla says:

    Excellent research & explained in a simple way. Congrats!!! Could you please let me know that if receiving gift from Daughter & Son in law is also free & Comes under the definition of close family. Thanks

  60. elango says:

    I am very much impressed with your article and end-up in registering in your site for further benefits. Here is my query and need your suggestion,
    I am in 30% Tax bracket, can I invest my post tax money by transferring to my wife and daughters SB account and in turn they can invest in PPF and SIP ELSS Mutual funds monthly if so what is the maximum limit for the amount that I can transfer per month to SB account without falling into the trap of clubbing of income rule.

    1. NO matter what, you will be getting into clubbing of income !

      1. Linson says:

        As per the trick 1 , you can transfer to spouse account and invest in ELSS and PPF. Please clarify..

  61. Raga says:

    Hi Manish,

    I must say it is a great article and very helpful indeed.

    I have one doubt regarding gifting money to my parents.

    Lets say I had gifted 10 Lac to my parents (they dont have other income) 2 years back. They invested it in FD and now present value of those FD in 12 Lac.

    Now I want to buy a property in my name. Can my parents gift me back all 12 Lac to help me without any tax liabilities.

    Regards,
    raga

    1. Yes. Thats possible 🙂

  62. Abhinav says:

    Hi I have invested 60000 on an ICICI prulife policy on my mother’s name. I am the only earner in the family and she is my dependent. Does this amount of 60000 will be reduced from my total taxable income.

  63. Bodhi says:

    What is the process of a father gifting a car to his daughter, both being in different states?

    1. Just transfer the money to her account and let her buy it !

  64. Srihari says:

    Say a gift of 5 Lakhs was provided from husband to wife which was not invested in that financial year but invested in next financial year. would husband need to pay tax in this case too?

    1. First understand that this 5 lac of gift is given out of POST TAX income .

  65. KD says:

    Hi Manish Sir,

    I have a query regarding this, How will we declare this gift amount in our ITR form to get the exemption for the donor..

    I am a salaried professional. Filing tax returns using ITR-1 for last 4 years,, Now say, I wanted to gift 5 lakh to my father, how will i declare this in ITR form ??

    My employer would have already deducted the tax using TDS and issued a FORM 16.

    Please help Manish Sir

    Thanks
    KD

    1. Hi KD

      A CA is more qualified to answer you query, hence I suggest better get in touch one.

      We are not right people to talk on this

      Manish

  66. rajvir says:

    so much informative … thank you

  67. Prateek says:

    Hello Dear sir,
    Regarding Trick 3 :Invest money on Major Children Name
    In this case ,should the parents have to pay income tax on the money transferred ?
    Kindly clarify since I’ve received conflicting views about this provision?

    1. Not that the gift which is given is always out of Post tax income. No one can save or claim any benefit for GIVING the gift

  68. GMS says:

    Can I gift an overseas deposit to my children as part of their inheritance under my will while I am still alive?

  69. Roma says:

    Sir,
    I have purchased house as singer owner.all investment was made by husband.payment was made to seller directly from my husband account. My case was selected for scrutiny in the income tax department.they are asking source of investment.
    What can i do now..
    1. Should i made gift tax deed though i have not received money in my account as stated above
    2. Or should i told that i have not made investment ,all the investment made by my husband.
    3. I file my return regularly
    4. Will they treat it benami transaction.
    Plz help me

    1. Hi Roma

      A CA is more qualified to answer you query, hence I suggest better get in touch one.

      We are not right people to talk on this

      Manish

  70. Deepika says:

    Can my spouse transfer the car in his name to my name without any sale considertion? (I am not a taxpayer as my income is below taxable limits) If yes, how is this treated :
    i ) If I sell the car after a few years, will the proceeds be added to his income(clubbing of income)?
    ii) If I invest the amount received by selling the vehicle will there be clubbing of Income as I am not a taxpayer?

    1. 1. Yes there will be clubbing of income

      2. Yes there will be clubbing of income

  71. subhankar says:

    thanks for the elaborated details. I have a doubt. lets say I have kept INR 100000 FD in my wife’s name and the interest earned at the end of year is 10000 considering 10% interest. That is taxable income for me. Now next year I have renewed the same (INR 110000).So the interest of next year will be 11000. Do I need to pay tax again for 10000? As you have mentioned only interest on interest is tax free Or that will be tax free?

    1. Yes, you will have to pay income tax on 10k again next year, not 11k .

  72. prathmesh says:

    i am NRI, if i gave 20L to my wife(resident indian) from my nre account and further my wife invest it in FD (say 10% RIO ) and earn 2L as interest.
    as clubbing income this 2L is come under my income which is fall below 2.5 L taxing limit (i don’t have any income source in india).
    then this is ok?

    and second question:
    if my wife invest that 20L in some real estate combine with her own money and sell it eventually.
    and pay any STCG (if arise), after selling that property ,can all money consider tobe my wife money ?
    (and then she make a FD, still interest on 20L is applicable to me?)

    1. 1. Yes, that way you dont have to pay tax

      2. No , for the part of money which you gave, you will only have to pay the tax

  73. Sachin says:

    Me & my wife both are working & filing individual IT Return separately.
    1) Now we both transfers fund to our minor child 50000 each. Pan card & bank account of my child is having father’s name in representation. How should we give tax treatment on return of investment ?
    2) If my in laws gives 60000 to my child how should i consider tax treatment on return of investment ? Gift amount should i consider as father’s income ?

    1. Sachin

      1. The income earned will be treated your income and you both will be paying taxes on that

      2. That will be treated as their income and they have to pay taxes on that

  74. shiva says:

    Hi Manish,
    If Married daughter gets loan from her father and invests as FD and files form 15G to the bank.
    Now if the interest earned on the income is below the tax limit, then, does it comes under clubbing Rules so that husband pays the tax on the interest earned by wife’s FD investment (Money taken from Her Father as Loan).

    1. First, husband does not have to pay any tax if the money was taken from father. In this case, wife will not have to pay any taxes , neither the husband.

  75. Shiva says:

    Dear Sir,
    I had given some money to my wife which was kept as FD and form 15G was submitted.
    Now, my wife received letter from Income tax to file Compliance Response sheet.
    1. Under the information provided, for Loan from Husband, can we mention” Self-Investment/ expenditure is out of gifts/ loans from others”
    2. what would be the implications of Self-Investment/expenditure is out of accumulated savings in compliance report

    1. Hi Shiva

      A CA is more qualified to answer you query, hence I suggest better get in touch one.

      We are not right people to talk on this

      Manish

  76. Ranabir says:

    Hi Manish,
    i want to know if i gift 2lac to my mom , & she spend it, instead of investing . how much tax rebate should i get ?

    1. None . The GIVER never gets any tax rebate of benefit !

      1. Ranabir says:

        Hi ,
        wanted to know is there any facility called loan to parents where i can avail tax exemption?

        1. No , you can never get any tax exemption by gifting or loaning to someone

          Manish

  77. Nitin says:

    Hi Manish,

    Is it possible to gift mutual funds held by me in Demat to my parents(transmit to their Demat)?

    Regards,
    Nitin

    1. Yes, you can do that. Look at transfer form by going to your demat office

  78. Deepesh says:

    Hi Manish – The net savings (after tax paid and household requirements met) – should I transfer it to my wife’s account (house wife) or to my parents account for further investment in shares/trading.

    My parents are senior citizens.

    Let me know for more details. Appreciate your inputs on this…Thanks

    1. I would suggest parents 🙂

  79. rudralak says:

    useful information about income-tax. helpful any way.

    1. Glad to know that rudralak ..

  80. Viral says:

    Hi Manish,

    i have one question:
    Husband on his retirement transfers the amount to his wife which is invested by wife in FD. As per income tax provisions, clubbing will apply. Can this transaction be shown as loan by Husband to Wife after having confirmation from wife about receipt of money. will clubbing provisions apply in case of loan by husband to wife??

    waiting for your reply.

    1. Yes, something like that can be done, But I think one should involve a CA for proper work.

  81. vandana says:

    hello sir
    i am only single earning member in my family with gross income of Rs 49800/- per month. 1.50 savings mark i have already crossed. before promotions i was getting net salary of Rs 34000+ (gross 41000/) after deductions such as pf, gsli, festival advance etc. Now, after promotions as my salary has increased to gross 49800/- still i receive 35000 only as around 4500/- every month goes in tax. I have two kids, two dependent in- laws and my husband is not working (still preparing for good job). Rs 4500/- everymonth tax seems big in my context, can you plz guide me to save it.

    1. Hi Vandana

      If you have saved everything under 80C, then the only way you can additionally save more tax is using the housing deductions available

      Manish

  82. Vikram says:

    Hi Manish.

    Thanks for the great article.

    I have following two questions: Please help me in this regard.
    1. To gift money to my parent, Do i need to fill any form or i can directly transfer in there account, whatever the amount i want?
    2. If my father open trading account and i transfer money to his linked account which he invest in market for less 6 months, will the returns be his income or mine?

    Thanks,
    Vikram.

    1. 1. You can just transfer the money online
      2. It will be his income

      1. Vikram says:

        Thanks a lot Manish.
        I have one more doubt but not related to above article but related to my second question.
        I know if shares are sold in less than one year then tax is 15 percent and if a person is trader then according to his tax bracket.
        Now if my father is trader and his coming into 10 percent tax bracket then on his earning, how much tax he needs to pay, 10 percent or 15 percent.

      2. Chetan says:

        Hi Manish!
        thanks for reply.
        What if one fine day I decide to get the money back from parents.
        What will be the implication ?

        Thanks ?

        1. Even then there wont be any tax implication. So you can free give and take the money from parents .

  83. Kumar says:

    I shifted my job and the amount withdrawn from PF gifted to my wife and she further invested in fixed deposit. The interest amount is less than 1 lakh. She is having separate PAN number. Is she or me liable to pay tax?

    1. You are liable to pay tax

  84. Amit says:

    Manish. I have gifted around 4 Lakh to my wife around 6 years back and she has been investing the total amount she get from bank after maturity again in FD for last around 6 years. Can you help me in understanding what will be implication as she is autorenewing the FD.

    1. It does not matter if its in auto renew mode. The tax on FD has to be paid each year even if you dont get it back in your hand.

      Manish

  85. Ravikumar says:

    if circulate my money to my wife through my parents, and if she use it for investments, do i need to club the returns to my account.

  86. Srinivasan says:

    Sir, It is very good article and was very useful to me. I have the following doubts. Please clarify.
    You said there will be clubbing in the example pertaining to gifting to wife but not in the example of gifting to adult children. It is contradictory.
    Can an adult child get gifts from relatives to the tune of Rs10lac in a year at various point of times in a year. Should they give a reason for gifting.
    Srinivasan

    1. Gifting from Parents to Adult Children is allowed without tax involvement , but not from relatives ..

  87. Manish says:

    The quality of your articles are very good and I love to read your articles.

    1. Glad to know that Manish ..

  88. Jaya says:

    Hi Manish, I follow your articles. They are very informative and easily understandable for the layman.
    I have a query regarding the gift-tax. What would be the tax implication of the gift between sisters?

    1. No tax implication. The receiver will not pay the tax !

  89. ayush says:

    hi,
    my wife’s father(on retirement) gifted rs 1lac to my wife.
    can i make a bank fd of this amount and save tax on interest assuming 10000

  90. Dr Mitesh Patel says:

    1. Sir , if parents or in laws give gift to their son , which is used for prepayment of home loan. Then what’s about tax implication ?

    2. If i m giving gift to my HUF. Then income generated from this gift, is it clubbed with my income or not ?

    3. Income generated by gift money is clubbed into donor side till how many year ?

    1. As there is HUF involved. I think you should talk to a CA on this

  91. Vilas says:

    Dear Sir , in regards to transferring the funds to son or daughter I have few querries- pl clarify– 1) Whether I am reqd to prepare Gift Deed on stamp Paper & whether its registration is essential/ desirable
    2) Whether the stamp value depends on amount to be gifted – if so pl elaborate
    3) Whether the Gift deed is required to signed by both Donor & Donee or sign of only donor is sufficient

    1. 1. NO documentation required

  92. Jayesh says:

    Hi, currently i am getting some money in cash from my company as an expense allowance on which I am not paying any tax. Can I transfer that money to my wife’s account and she can show it as gift? Please advise.

  93. Vinod says:

    Great Article….

    Can you please advise, refer to your “Tax implication on the gifted money” illustration, only the first year interest/income will be clubbed to husbands income or the same will follow in the coming years?.

    Vinod

    1. All the interest in each year will be added .

  94. Aditya says:

    Hi Manish, Is there any proper legal way to gift money to your parents(mother) or just transferring the money to her bank account would suffice.

    Thanks

    1. Transferring money online is fine !

  95. peter says:

    hi,

    My mom has no income source and get Rs.8000 monthly interest from bank FD’s is there any need to pay income tax returns

  96. akhil says:

    Sir
    I am 21 years old studying in college. I am earning 24k per month through social media marketing and additionally my mother is sending me 5000 per month. My mother is a housewife and she earns money by providing tuitions. I am investing a part of my money in ELSS mutual funds and have recently bought a health insurance plan in order to get tax benefits under section 80C. Do i need to file income tax returns and pay gift tax?

    1. Hi Akhil

      You will have to file the returns only if your taxable income (income – 80C) is above 2.5 lacs, which I think is not your case.

      So you dont have to .

      Also note that health insurance premium give you additional exemption under 80D , which is other than 80C !

      1. Akhil says:

        Sir
        Thanks for the reply. Is it advisable to file IT Returns even though my taxable income is less than 2.5 lakh p.a. ?

        1. Yes, just to maintain the records !

  97. AKEAL says:

    HI IF I INVEST 1.5 LACS IN PPF IN NAME OF MY WIFE AND DAUGHTER FROM MY ACCOUNT HOW THE INCOME WILL BE CALCULATED AS PPF INTEREST IS TAX FREE?

    1. In that case there wont be tax free !

  98. Vedprakash says:

    Very good article. I was thinking about this that how gift can save tax and its legality. Well explained in detail. Double thanks.

    1. Thanks for your comment Vedprakash

  99. Gautam says:

    Sir
    I may have commit some mistake for lack of proper knowledge and misguide by a local sub broker. That my wife earning few thousands by giving private tuition. She wants to invest the money so it can be used for my daughters future. The sub broker who is personally known to me advised me to open a demat A/C and invest it in regularly. He assured to giving tips for investment and further informed no tax is to be paid if I hold shares for a year or more. I did so. But as the money is of my wife, I opened an demat A/C in her name in early 2015 mentioning her profession as House Wife and transferred the entire stock valued around 1.5 L to her A/C on 31.03.2015. She further operated her demat A/C till 4th Sept ’15 i.e. bought and sold shares including those shares were transferred to her A/C (some of them held for more than 1 year and some of them less than 1 year).

    At this point I came to know about the Income Tax implication. Now please guide me how can I manage the tax implication, or how can I manage the situation. I have already submitted income tax return in ITR I on 31.08.15 as I dont knew the probable implication. Please help sir. I am ready to pay the Income Tax, I dont want to dodge the Tax but want to minimize it.

    1. Gautam says:

      Sir may I prepare a separate Income Tax file and mention her profession as small business w.e.f. 01.04.2015? Does it help?

      1. Gautam says:

        Sir
        For further information, she never encashed any amount by selling equities, she reinvested in other equities. So, what amount may be taxable?

    2. But if you have held the stock for 1 yr, then there is no tax

      1. Gautam says:

        Sir

        Many many thanks for your quick guidance, at least now I am confidant that I do not need to think of paying tax for equities held for more than 1 year be it transferred to wife’s demat A/c. As such I shall advice my wife NOT sell a single before holding for at least 1 year.

        But what is the tax implication for
        i) Stocks that were held less than a year transferred and sold? Whether in that case profit/ loss is taxable or the entire selling amount is taxable? What if say the entire sale value is 60000 and profit 5000?
        ii) Stocks that she purchased by her after opening demat A/C in her name by issuing cheques from her Bank A/C and made profit in less than a year. Say she bought equity in 04.02.15 @ 20K and sold it on 22.05.15 @ 28K?

        Please help sir and how much I have to pay now sir ?

        Thanking you Sire

        1. Vedprakash says:

          1) If equity (stocks or equity oriented MF) hold for 1 year will be considered as LONG TERM CAPITAL GAIN (LTCG) and it is tax free income.
          2) If you BUY AND SELL with in a year and earn/loss in sort term is call SORT TERM CAPITAL GAIN (STCG). this taxed at flat 15%. One more option is that if you earned Rs.50000 and lost 30000 in another then your taxable income will be 20000 only. In case this year you have lost in stock, no worry you can carry foreword for next (up to 7 years) year, provided you must submit this loss in your TAX return form . Note that this adjustment for only for CAPITAL GAIN and LOSS, not for regular income.

          1. Gautam says:

            Thank You sir very much for your valueable information. Sir whether this is same for equities transferred to my wife’s demat A/C as mentioned earlier in my case. For your information now I can get assured that tax implication is not for entire value of transfer, it is short term capital gain; am I I guess right sir?

            Yours faithfully

            Gautam

            1. Yes, you just have to pay any short term gains

            2. Gautam says:

              Many many thanks, Sir

        2. i) THen 5000 should be added to your income and tax to be paid

          ii) I think you should get help of a CA on this . As there many things involved

  100. Shankar says:

    Very interesting to read the legal way to save tax. I have few more points for advise.
    1. If I give in gift of Rs.10 lacs to my spouse from my terminal benefits upon retirement post tax, still the interest earned by her as FD interest is required to be clubbed from the giver’s(husbredit tand) income?
    2. If the income earned through FD by the spouse and if invested by her in tax free bonds/NSC certificates etc., still the interest income is required to be clubbed with the giver?.
    3. If the gift given to mother after a few years be transferred by her to major daughter and in that case whether clubbing of interest income by the original giver (father) will still arise.

      1. Shankar says:

        Thanks so much for your crisp answer to my questions.

  101. Ram says:

    Hi Manish,
    My Dad sent Rs. X Lacs money while I was overseas 4 years ago. I assume that the money was sent to me as a gift to save tax I believe. In recent times, I came to know that there has been some I.T related issue that has come up from I.T department. My Dad doesn’t give me the details clearly about the issue whenever I ask. I’m not able to understand as to why there would be a problem if the amount sent to me was a gift. Could you please let me know why there would be a problem? I’m currently in India for sometime now and working here since past 6 months. A tax consultant (CA) whom my Dad regularly visits for his business needs suggested that if I give back the X money via bank transfer, the problem would be solved. Could you please let me know in what case this solution would be provided? I’m actually confused. Kindly help!

    Please note: I’m totally new to tax system here.

    1. I dont think there should be any issue if your father has provided any money . I guess he must have already paid tax on it and then transferred money

  102. sharan says:

    Hi,
    If i gift to my wife and she invests in FD, the interest earned will be clubbed with my income. where as if I gift to parents and they invest in FD the interest earned is tax free?
    so there is a difference between gifting to wife and parents?

    1. Thats the difference, as per rules, clubbing will not apply if you give money to spouse and minor kids

      1. Kumar says:

        Dear Manish,

        That means you mean, Clubbing will not apply if gifted to spouse & clubbing will apply if gifted to Parents?

  103. Amitayu Dey says:

    I have a pending Home Loan of 12L with LIC housing finance. I want to close the home loan with LIC by taking a loan from retired father from his PF. The EMI I am paying LIC, I will pay to my father. How can I save tax under 80C and also how much tax my father have to pay, if any.

    1. You wont be able to claim 80C if its taken from father. You can only claim interest part. Your father will also have to pay tax on the income he gets above the tax exempted limit !

  104. hemendra says:

    if my dad have some amount like 50 lakh and have other income source also like pension, so what can he will do to exempt from tax.

    can he gift me the amount to me (major child) and then i further gift the amount to my non taxpayer mother (senior citizen)..??
    then the interest earned from that amount will be my mother income.?
    may is it possible..???

    1. No, that cant be done . He can gift it to you . but if you have additional income it will be tough to save additional tax.

  105. Gopinath says:

    One clarification needed. When gifting to old parents, if they open a FD with joint name of the gifted son or daughter due to the fact that they are growing old and from practical operation of FD account perspective they keep the young one as joint account holder who is also a giver of the gift, does the tax implications explained above still valid or since the giver became the joint holder of that FD the gift tax rules are no more valid.

    1. Yes, its still valid if the first holder is the PARENT

      1. Gopinath says:

        Thanks a ton.

  106. Sunil Sharma says:

    I did no understand Trick #2: You sad give 20 Lacs to each parents, and let it get invested in a bank FD at an interest rate of 10%. Now both of them will get 2 lacs as the interest income individually and this is their only income in a year and will be below the exemption limit (Rs 3 lacs for senior citizens) . So there won’t be any income tax to be paid by them. Now ttal amount become 44 Lacs

    As you have given this money to you parents just to save tax. Can you also tell how I will get this 44 lacs (as I hav given this money to just save tax not actual gift)

    Thanks

    1. Tax is calculated on income and not worth . So only tax is applicable on 4 lacs. Also here by gift I mean you need to actually give it 🙂 . You cant get it back

      1. sunil sharma says:

        Thanks for replay,

        Topic of the discussion was 3 awesome tips to save income tax legally. Now you are saying I have to give tax on only 4 lacs that any way I have to give, if I would have done FD at my name. the how I save the tax.

        Thanks

        1. I think i made a mistake in my reply. If you keep that 40 lacs with you, then your income will be 4 lacs and you will tax on that. However if you gift this money to your parents 20+29 . Then the money will stay in family and no tax to be paid. However that 40 lacs will be of your parents now .

          You cant get it back

          Manish

  107. Dilip says:

    Thanks

    What is to be done so as to save from clubbing.

  108. Rajesh says:

    great article
    Looking fora good CA who can advise me on tax matters

    1. Hi Rajesh

      What all you need advice on? please share with us so that we can share our CA details with oyu. You can connect with him

  109. Sushilkumar says:

    Both husband and wife have taxable incomes from their respective investments But the incomes are in different income tax slabs (10&30%).
    Is it possible one spouse gifts some money to another to affect a change in the income tax slab(<30%).Comments please……..

    1. No , the person in higher tax bracket will be taxed

  110. Ritu says:

    Very awesome article.These are the legal ways of saving income tax.These tips are very handful.You can also use money in holiday planning rather than paying heavy taxes.There are so many other ways also to save income tax.

    1. Hi Ritu

      Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also

      Manish

  111. Tushar says:

    Very good article..

    1. Thanks for your comment Tushar

  112. Dilip says:

    If an individual gifts 10 lacs to major child who is serving and that child gifts to his mother then mother
    keeps FDR and interest earned from FDR is to be clubbed or that may be seperate income of mother ?
    pl guide.

    1. ADARI ESWAR RAO says:

      To my understanding, it is taxable in the hands of original giver of gift i.e. Father/Mother. As per the explanation given above, the income earned on the gift given to a major child or to parents is not clubbed in the hands of giver but the income earned on the gift given to a spouse or minor child is clubbed in the hands of giver. In this case, since the gift is coming back to the spouse of original giver, the income on the said gift is to be clubbed and taxed in the hands of original giver.

    2. It will be considered the income of the original giver (father) as it went from father to mother eventually

      1. Bhavesh says:

        Hi, seeking advise on gift tax. If I need my father to transfer some amount for example 5 LACs by check, he is retired from govt. services years back. Does he need to pay gift tax for this transaction. If yes, then what would be the % of total transfer he need to pay as tax?

        1. There wont be any taxation for him

  113. John says:

    Hi Manish,

    I am living a overseas for 10+ plus year, few month ago’s i have gifted 20 lacs to my brother from mysaving account to his saving account. Actually it’s my nre long back amount, kept in FD and shifted to my saving account and then transferred to brother account. Recently IT department send the letter to my brother for justification and he replied back by giving my saving account, stating the brother gift. Probably soon they will send the letter to me for justification.

    Kindly advise, how to deal this.

    Thanks

    1. So whats the issue, explain them whatever is the case. That he is your brother and you have gifted the money to him !

  114. puneet says:

    Very nice article .. But what about the original amount that was gifted i.e., Rs 1 Lac as in ur example ..if husband gifts Rs 1 Lac to wife who earns Rs 10000/= from it.. Rs 10 K gets clubbed to husband s income and any income generated on this Rs 10 K becomes wife s income .. actually wife has Rs 1.1 lacs now even after payment of taxes post clubbing .. U said about clubbing of income generated i.e 10 K here but what d be treatment of Rs 1 lac that is still with wife(her gift) .. now if she invests this total Rs 1.1lac and earns another Rs 11 K what d be the tax implication..

    1. ON that 1 lac part, the income will always be treated as husband income

  115. Laxman says:

    I am a salaried person havindg a taxable income. my wife is a housemaker and doesnt have any income.
    If i invest in her PPF account can i claim deduction under 80C? what are tax implications if she invests this maturity amount in other investment avenues?
    If I invest in ELSS in my wifes name what tax implication of reinvesting principle amount in my or her name?

    1. You can claim 80C benefits even if you invest in her PPF name

      For ELSS , you can reinvest the money in her account without any tax liability

  116. Uday says:

    “You may even consider giving interest-free loans to your children as it is lawful and can help you save you more taxes.”

    Could you elaborate what do you mean by this? How can you save on your taxes?

    1. Hi Uday

      Did you go through the whole article ? BEcause its already explained !

  117. prakash says:

    Thanks for very useful article. Whether PAN No. is needed for opening a bank FD in Major children name, who is a studying. If there is no PAN No. , whether 20% tax is deducted by the bank on interest earned on FD

    1. PAN is not mandatory. But yes TDS will be deducted at 20%

  118. Visitor says:

    Dear Manish,

    First of all thanks for the information and attending all the queries and I appreciate as well as learned from you something. Truly Thanks!!

    Would be thankful if you could reply a query mentioned below:

    My mother in law has got 2 immovable properties + some gold & a cash with her. (My father in Law is no more unfortunately). My mother in law wants to gift or give all this chunk to my wife (and not her son for the reason that he didn’t treat her well when she visited him in States for 6 months). Hence wants to transfer everything to my wife as we take her care since our marriage i.e. 8 years. Now the question is

    Property 1 (in the name of mother in law) – approx cost 50 Lakhs
    Property 2 (in the joint name of in laws but father in law is no more & hence transferred to mother in law thru nomination) approx cost 30 lakhs
    Gold & Cash

    with this can you suggest pl the best way to save tax, transfer the properties safely (as a gift or something) because my mother in law’s only wish is to not give a single penny to her son due to bad treatment given to her and she wants this transfer very concrete to her beloved daughter.

    Also what actions need to be taken with society offices like nominee forms etc?

    Also if you could help, whether WILL made to this effect will be sufficient? full proof or that could be challenged by my brother in law in court or he can at least trouble in getting transfer at least the immovable properties. Whether society can ask for his NOC. Is it OK to wait to get property thru inheritance or by transferring it today by way of gift or transfer but without incurring tax liability.

    Request to give a best thought on this and then reply.

    Many thanks in anticipation. Take care.

    Regards!!

    1. Hi Visitor

      This actually require a full time lawyer to excute things fully . So my suggestion is to hire one and pay him fees for this. I am giving you answers on high level

      Looking at hte status of properties, she can surely gift the properties to your wife right now itself because after death things would become complicated because son will also contest for it and it will eat up time ! .

      If your MOL is planning to transfer the house to your wife only after her death , then a strong will needs to be created and for that take help of some good lawyer !

  119. vikas says:

    Hi. Nice article.
    Pls subscribe to ur Private mail list. So that along with ur mails i can also enquire u about doubts if any.

    1. Hi Vikas

      As far as I can see, you are not subscribed on our email list. Did you get any email from us recently ? Can you please forward it to me ?

      Manish

  120. Laxman says:

    Very informative article.

  121. Y N SADANA says:

    Dear Manish Ji
    Thanks a million for the article. I wish my accountant had advised me of this when he filed my return four years ago.
    Super useful information for pensioners
    God Bless.
    A pensionet

    1. Glad to know that Y N SADANA ..

  122. Ram says:

    Manish, from this article I understood that the money gifted to parents/spouse doesn’t come under tax exemption and must be mentioned as taxable income. I have read another article in ET https://articles.economictimes.indiatimes.com/2014-01-24/news/46562979_1_basic-tax-exemption-tax-rebates-income-tax-act and https://timesofindia.indiatimes.com/business/personal-finance/The-seven-ways-you-can-escape-tax-legally/articleshow/47763424.cms .

    1. Yes, there is no exemption ever for the person giving the gift !

  123. Bhaskar says:

    I have a different scenario. I gift to my wife account by net transfer some money writing gift in transaction detailes.She then buys open ended equity mutual fund(not ELSS). After this two thing happend:
    1> She then after one year sold the same and amount invested in FD in her name.
    2> She sold MF after one month with capital loss and then invested in FD in her name.

    Please suggest what will be the tax implication .

    1. In both cases, the principle amount interest will be on you for FD .

      1. bhaskar says:

        Sorry Manishji,did not get you why it is. In this case “open ended equity fund (more than 60% equity)” is being considered as equity ?

        If my wife have demat account and bought shares in her name what would be the scenarios?

        Thanks in advance.

        1. Not the one which is with 60% .. Only if equity is more than 65% , it will be considered as equity funds

          1. Bhaskar says:

            Thank You Manishji for reply, (In many of your old article comment sectiion is equally information rich with the main article)

            So to summarise:
            Gift to wifes savings account–> Buying pure equity fund(wifes name)—>Selling off (short term cap gain/loss)—> putting FD in wifes name.
            Above step is conforming the guide of main article of yours? Please confirm.Thanks in advance.

            1. Yes, there wont be any tax on the return part as its tax fre

  124. gautam says:

    suppose husband had 5 lack old capital in his hand & in current year husband earn 10 lack & he gifted her wife 2 lack , then kindly tell what i.t department assume….

    1. It will be taxed in your hand, if there is any income

  125. Rocky says:

    Very nice article. Comments were really really helpful

    Wife has income from tutions. If husband give gift to her and she invest it in FD, interest from FD needs to be clubbed with husband income? As she has separate source of income, does clubbing rules still applies in this case?

    1. The point is the person who has higher tax bracket will be paying the tax in your case. If you are in to 30% and she is in 10% and you gift, then you will pay tax

      Manish

  126. manali says:

    thanks a ton….very useful information

    1. Thanks for your comment manali

  127. roy says:

    Kindly subscribe to your e-mail newsletters

  128. hitesh says:

    good clarification with examples to understand gifting process to avoid law within preview of existing law

    1. Glad to know that hitesh ..

  129. SUDHIRLAKKUNDI says:

    Sir,
    I am a Bank Officer. Can I employee my wife to look after my income? I have income from Salary, Investments, Shares and bonds. I have to regularly monitor my movable and immovable properties tax, maintenance etc. My wife’s qualification is BSc. BEd. She also has experience in dealing with shares and investments. I would like to pay approx. 8000/- PM as salary out of my Income. Please advise.

    1. I think a CA would be needed for this . He will guide you properly on this

  130. Bijay says:

    If I transfer money to my spouse post payment of taxes on my income, then income earned on that transferred money will be taxed at my hand or it will be taxable income of my spouse.

    1. Visitor says:

      It will be taxed in your hand (not your spouse).

    2. It will be taxed in your hands, if your wife does not pay tax

  131. Chandra says:

    Manish this is very helpful.

    A follow-up question on”Alternative way” : What happens if Rs 10 lakh is again invested on wife’s name in year 2 in FD? Who is liable to pay tax on it?

    1. Visitor says:

      Interest earned on the principal amount of 10 lakhs will continue to be taxed in your hand (in 1st, 2nd and all subsequent years as well), even though invested/renewed in your wife’s name.

      Interest earned on the amount earned as interest (during 1st year and all subsequent years) will be taxed in your wife’s hands.

    2. Each year the clubbing would apply !

  132. JAGANNATHrao says:

    very good and valuable article to income tax assesses

    Thanks

    1. Thanks for your comment JAGANNATHrao

  133. khushbu says:

    hi
    my income is 20 lacs and tax is deducted by ‘yer. i want to reduce tax directly and not by transfering money as gift or as investment in funds.pls reply.

    1. You cant save any tax even by directly transferring or giving gift . Other than 80C, home loan tax benefits, there is not much you can do !

  134. Bhagwan says:

    Please tell whether clubbing rules apply to the following cases:

    1. Online transfer from father’s SB account to major son’s SB account ?
    2. Online transfer from father’s SB account to major son’s PPF account.
    3. Online transfer from father’s SB account to major son’s joint SB account where son is the primary account holder and father is the secondary account holder.

  135. Ankur says:

    Hi
    Manish Chauhan
    Thanks for detailed information
    1) I wanted to know that what are the formalities to be completed for gifting cash to parents like any kind of gift deed or anything else and how to mention it in investment declaration form. should i transfer gift amount online or by cheque or by cash.

    2) and i also want to know what if cash gift amount is less than 50,000 then also all the formalities are needed to be completed?

    3) And if i want to show that i am giving house rent to my parents then what are the requirements for that, is agreement needed for this or what?

    1. 1. If you can avoid giving gift through cash, then you dont need any proof, because you already have the proof of transfer !

      2. Yes, other wise how will parents prove that it came to them from son ?

      3. Not exactly . Agreement might be required by employer as proof, but that happens when rent crosses a limit .else they dont ask for it

  136. Shanya says:

    if Husband gives Rs 1 lakh to his wife and wife buys gold with it ,so that asset will not be clubbed in income of husband ?

    1. Not the asset, but any gains in future will be clubbed with husband income

  137. Srinivas says:

    Good Article

  138. venkat says:

    Hi Manish

    i am planning to buy property. my Father-in- law will will deposit amount in wife account(online) and then the amount will be trasnferred to our joint account(wife + myself).Basically to show her contribution in the property buying. i need clarification on following

    1) Hope this will be considered as GIFT

    2) Any record to be kept for future tax purpose

    3) Any other things to be kept in mind

    1. 1. yes
      2. no
      3. Nothing 🙂

      Mine was also same case 😉

  139. Balasubramanian says:

    Excellent and very useful article. You have described the matter in a very detailed manner. Thanks for your Good service.

    1. Thanks for your comment Balasubramanian

  140. Kmgurumurthy says:

    On my wife taking VRS I gave some money to my married daughter for uprchaing a flat out of her retirement benefits. Now I am retired and want to give back the money to my wife which she would invest in FD. Whether this can be taken as loan repaid and the interest on FD is not climbed to my income. She gets a pension of around Rs.3000 pm

    1. If you give any money to your wife, the interest on that will be clubbed with your income only

      Manish

  141. arun says:

    Do you have somebody in Indirapuram NCR delhi.

    1. I didnt understand ? Why do you need someone ?

  142. Ashish says:

    Hi,
    Many thanks for all the write-up you do for community.

    One quick Question.
    Let’s say I am earning 2 lac per month and out of that 2 lac, I am gifting 1 lac per month to my mother. This makes the total of 12 lac yearly gifting to mother. Does this need to be in FD only or can it be in my mother’s saving account as well from where she can withdraw as and when she need.
    Also In tax declaration, where do I need to mention this and what are the proof required in case of offline transfer instead of bank transfer?

    1. She can keep it whereever she wants. If its offline transfer , then you need to make a gift deed for that. Contact a CA on this . What will you achieve by giving it offline ? Why not transfer it to her account ?

      1. Ashish says:

        Thanks Manish.
        So if my mother is getting 1 lac per month from me, it will be 12 lac yearly for her.
        Does she need not to pay the tax on this amount as per tax slab?

  143. Shashikant says:

    What about 40 lacs gifted to parents, if parents gifted this amount to me after some year? is this 40 lacs clubbed into my income for that FY?

  144. Singh says:

    Really very useful

  145. mahendra says:

    my children receive cash during diwali, birthdays and special occasions, up to 50000. What is the tax treatment of this cash if I am regularly depositing this amount in their hdfc children’s gift fund ( minor a/c) linked to my a/c?

    1. If you are depositing cash , then how will you prove that its coming from your birthday and diwali occasions .. I suggest that you use up that cash and transfer the equivalent money from your account to kids account . Its like you are just managing to show that its not the money for which tax is not paid

  146. Manoj says:

    fantastic artical I was searching in internet for the long time for such articals. Thanks Manish.
    One query : Suppose a Karta of HUF transfer his own many to his HUF and HUF purchased share from this money, Now HUF has taken loan against purchased share from his broker and gain short term gain of “Z” amount from the loan amount by investing in shares . In this case who will pay tax …

  147. Bhakta says:

    Very nicely explained. Some of comments also helped me to understand how to claim that someone given gift.
    Just a small question, money needs to be transferred at once or I can send money monthly? In case when someone wants to open RD on parents name.

  148. Jitendra misra says:

    Dear Sir,
    If i make fixed deposit in name of my mother in law directly from my account.Would it attract Gift tax and whether interest earned from the said fixed deposit would be clubbed in my income.

    1. No , it wont be clubbed with you income . It will be treated as your mother in law money

  149. Surya says:

    Hi,

    I didnt get the gist of the matter. I am earning 15 lacs p.a, if I transfer suppose 20000 monthly to my fathers account ie 240000 per year, can i show it as tax exempt income to my employer? If yes, under which section should I mention this under my investment declaration.

    Thanks,
    Surya.

    1. As I said in article, the gift you give is out of your taxable income . You can never get any tax exemption on it

  150. niki says:

    In your first example..
    Husband earns 10,00,000
    He gifts his wife 1,00,000
    Husband still pays tax on the whole 10,00,000
    Wife invests 1,00,000 in tax free return scheme. and gets 10,000 tax per year thats interest free.

    Well, the husband could do the same right? Why go through this whole cycle?? If the return is tax free, then even if the husband directly invests 1,00,000 , he gets tax free 10,000. Isnt it?

    1. Its not a trick to get a tax free income, Its mainly to build assets on wife name and also when the interest is reinvested back , then that income will be wife income and she will be paying tax on that

  151. Jitendra misra says:

    Suppose Fixed Deposit Receipt is made in senior citizens name (mother above 80 years ) and form 15G or !% H as applicable has beeb deposited for the year in advance and the bank has not deducted any TDS , then whether the person receiving the proceeds by virtue of inheritence liable to pay tax @ of his tax slab from the day of death (Say October) to the time the fixed deposit matures.

    1. NO , one will not pay any tax if he has got it due to inheritance

  152. Abhishek Jain says:

    If husband gives money to wife, the interest earned on that money will be husband’s income. However, parents can give money to children and vice versa. So if a parent gives money to the child and child gives it to another parent, the interest earned will be 2nd parent’s income. Isn’t this a flaw?

    1. NO , it will not be that way . The interest will still be another parent income only. These kind of workarounds are not allowed and are subject to scrutiny. If its very clear that the whole transfer is done in such a way just to avoid the tax , then its not allowed

      Manish

  153. Arun says:

    1. My mother is not a income tax assesse and do not have PAN. She does not have any income. If I gift her Rs 15 lac, which is more than tax exemption limit, does she require to file income tax return even when this income from gift is tax free in her hand?
    2. When she invest this amount say in bank FD and earns say 1.5 lac in a year, which is less than tax exemption limit, does she require to file income tax return?
    Thanks & Regards
    Arun

    1. 1. I guess yes , no tax , but filing has to be there. Check with a CA

      2. NO

      1. Arun Dahake says:

        Thanks a lot Mr Manish
        Arun

  154. sukrsa Lan says:

    Dear Sir,
    1) If I transfer some amount say 30 lacks to my wife’s account, there will be no tax implication for both of us. Afterwords, if that amount invested in FD then the interest earned will be clubbed with my income.
    2) Now if I transfer the amount to my father-in-law’s account then also there will be no tax implication for both of us. Afterwords, if that amount invested in FD then the interest earned will not be clubbed with my income and it will be consider as father-in-law’s income.
    3) If father-in-law transfer the amount to his daughter’s account (My wife) then also there will be no tax implication for all of us. Afterwords, if that amount invested in FD then the interest earned will not be clubbed with my and father-in-law income and it will be consider as wife’s income.
    Please clarify all of the above situations are legal or not.

    1. sukrsa Lan says:

      Sir, please reply.

    2. This kind of cyclical arrangement is not possible . This will be kind of illgal workaround to save tax and hence not possible

      1. sukrsa Lan says:

        Manish Sir, may I write you personally regarding advice?

  155. Wonderful. Very clearly explained

  156. Smita says:

    Hi Manish,

    I do online money transfer of 10-15k every month to my father.
    Can I get any tax benefit of it? If so, can I claim it at the time of return file and how?

    Thanks,
    Smita

    1. No you cant ! .. Giver can never get any tax benefit !

  157. Gopi says:

    Thanks a lot for such a clear & important articles to save Tax.

    I Think the above article Tax rules applies for NRI also.

    i.e. As I am NRI can i gift to my wife through account transfer(My NRE to wife’s saving account in india) ? & if so I think no need to pay tax if the income earned by the gifted money less than 2.5Lakhs. As i understand NRI no need to pay tax in india & income earned in india through investment is less than 2.5 Lakhs.

    Can i gift money to my parents through account transfer(My NRE to Father’s saving account.

    1. Yes you are correct ..

  158. Prakash says:

    Fantastic explanation.. You won’t find such detailed explanation anywhere.. Thanks, Manish.
    Manish, if I gift money to my own sister lets Say 21 lakhs, if she invests this amount in tax free mutual funds etc. Interest Will not be taxable neither for me and nor for her..I mean no further tax implications for both of us.. Right? Please confirm back.

    1. Thats correct . Just that now its her money and not yours 🙂

  159. Unknwon says:

    What will happen in the following case?

    1) I gift X amount to my mother-in-law on her birthday
    2) My father-in-law gifts x amount to my wife (i.e. his daughter)

    1. Hi Unknwon

      1. Not taxable for her

      2. Not taxable for her

      Manish

      1. Unknwon says:

        isn’t it tax evasion, as both parties have compensated same amount by gifting each other’s wife?

  160. s.prakash says:

    Dear Manish,

    Thanks for the excellent article.I have a query. Whether I an transfer money to my father-in-law’s account, which is a joint account with my wife (online) and invest in FD. Whether interest earned on this FD is taxable.

    1. Interest on any FD is taxable !

  161. randy says:

    sir,
    am settled abroad and got my mother sold a ancestral property that got 60 lakhs for her.we are thinking of splitting this and depositing it in 4 diff banks – to avoid TDS on FD interest..all these accounts were on my mother’s name,who is just 60, who also has a 15G submitted with each of these banks to get the 2 lakhs exemption from each of these account…..now, is the above method of doing perfectly legal n terms of tax savings?

    1. Hi randy

      How will you save tax by saving TDS ? I assume that you have no idea what TDS is all about. Please read this – https://www.jagoinvestor.com/2013/04/tds-tax-deducted-at-source-guide.html

    2. Srinivas says:

      The process is not correct.

      15G is a documents submitted by an individual stating that his/her known sources of income for the period is within taxable limit. In your mother’s case, she knows that her income is more. Hence this process is not legal.

      If one is really having income <taxable limit, TDS or no TDS, one can get back what ever was deducted.

      Now all deposits are tracked based on PAN number and using that all the deposits under a single PAN can be identified by ITO. Hence, it may be prudent to talk to a CA and do as was suggested.

  162. ekchom says:

    Can the following be done
    1) I gift rs 5 Lac to my parents
    2) After some time, My parents gift similar amount to my wife (Daughter in law)
    Whether clubbing provision would apply out here ?

    1. No you cant do that . Its a very visible kind of fraud to avoid tax 🙂

  163. Prakash says:

    Hello… nice article !! I have a query.

    Mother gifts shares (from her demat account) to Son (into his demat account) which are transferred offline through delivery slip.

    As per IT Rules, there would not be any tax involved either to the donor or donee, nor the income from it will be clubbed.

    BUT, does this require any documentation for Income Tax purpose ? A signed declaration from Mother listing the shares or so ?

    1. Hi Prakash

      I dont think any documentation is required in this .

      1. Prakash says:

        Hi Thanks for the reply.

        If the Mother now gifts shares (in demat form) to her Daughter-in-Law (demat transfer offline), should this GIFT be documented (on a plain paper signed by Mother) for IT or any other purpose ?

        I am aware that income (Dividend, Capital Gain) generated will be clubbed under Mother’s income. So, the Dividend and Long Term Gain, though tax free is being shown under ‘Exempt Income’ of Mother’s IT Return.

        Thanks

        1. Hi Prakash

          No documentation is required. Because the transaction is anyways on the records !

  164. NITIN JAIN says:

    hello Manish/Rishab,

    Is there any limit on the gift to be given in a year to the housewife ?
    From your note above it is mentioned that if FD is done in wife’s name, the interest till first maturity of FD is added in the working husband’s income. What is the minimum duration for this first time FD ?? Since FD can be done from 10 days to 10 Years.
    After maturity if FD is again done, then the interest income is added to wife’s income. So can a person do a small duration FD–>Pay tax over that small interest earned and after that the money belongs to housewife and if once more FD is done, it can be totally tax free or will be taxed in the hands of housewife in minimum slab.
    Can you confirm on this ?

    Thanks,
    Nitin

    1. Hi Nitin

      I think you have got it wrong . Its not that only the first year interest is added , but all hte years interest will be considered husband income,. Only the interest on the interest part will be of wife’s income .

      There is no limit on the gift one can give.

  165. agdahake says:

    A very useful article. I was reading all the threads but one thing I could not find or I may have missed.
    1. Is married daughter also considered for gift the same way as parents?
    2. Can my mother nominate me in her mutual fund scheme or any other FD scheme?

    Thanks
    Arun

    1. Hi Arun

      1. Any major children married or unmarried are treated like parents do .

      2. For nomination, one can nominate anyone ! .. Even I can be nominated !

      Manish

  166. Jeevan Singh says:

    Nice one. Thanks a lot.

  167. Sanjeev says:

    Hi Manish,
    My father recently retired from his service and is thinking of gifting half his retirement proceeds to my mother who is a house wife. She will be depositing that amount in FD. So I understand clubbing provision would apply here and my father will have to pay tax on interest income generated. He is not looking to invest it in equity or other tax saving funds.

    My question is
    1. Can he lend her the money @ say 3-4% (equivalent to savings account interest rate) and she in turn invests it and whatever income she generates, she files tax based upon her income slab?

    2. He gifts her the money and she in turn invests and pay income tax on her income based on her slab?

    Thanks!
    Sanjeev

    1. I think option 2 would be clean.

      1. siva says:

        Hi Manish,
        The clubbing provision would apply here.

  168. Rajesh Gannavarapu says:

    Very nice article. Many thanks.

    1. Welcome .. Glad to know that Rajesh Gannavarapu ..

  169. Charan says:

    Hi sir, if I get a amount of 1crore for my education from my wife uncle(he is a my wife’s Mothers own brother he is paying tax for huge amount. He is giving me that amount as DD in the name of college. As I’m a student and not earning Iam I taxable?

    1. Hi Charan

      I think it will be taxable in your hands. Ask your uncle to give it in Wife account

  170. sumeet says:

    I am self-employed. Suppose I earn 10L per annum. Can I show my parents as employees and pay them income (salary for data management). So my parents income will be 5 lakh and mine 5 lakh. So the tax liability decreases. probably 10K tax for each considering deductions rather than 1.1 lakh in my name

    1. Sumeet

      Its not that straight forward. You can show salary to them, but not unjustified. What will you show that your parents do in your work ? If there is an inspection later, will you be able to justify it in front of a tax inspector ? So dont just pay them salary and claim it. It can turn against you. If you want I can connect you to our CA , and he can optimize things for you . Let me know

      Manish

  171. Rachael says:

    Thank you! I have been searching for an article on gifting for a long time 🙂
    I have one question. You have mentioned that a gift given to a wife can be invested in an ELSS MF with a 3-year lockin period and the returns will be tax free. Does the same apply to any equity mutual fund that is held for a long term? That is, if I were to invest the gift amount in HDFC Equity Fund for a period of say, 5 years, will the returns still be taxed?
    Thank you once again for the great article.

    1. Hi Rachael

      You will still be not taxed if you invest in non-ELSS for more than 1 yr , because by the nature of taxation, returns on equity is non-taxable after 1 yr as its long term capital gains .

      So here is what you can do

      1. Take money from husband in your account
      2. Invest it in ELSS or non-ELSS funds
      3. On any returns after 1 yr or more, no tax to be paid !

      Manish

      1. Rachael says:

        Thanks for the quick response, Manish.
        And thank you for clarifying my doubt. This is what I have been doing and it is great to know that what I am doing is legal!! 🙂

  172. TaxPayer says:

    Hi,
    My mother was buying a property and for which I contributed money and this money I paid to seller through cheque. Can I show this as gift to mother? Also can I take the same property on rent from my mother and show the rent for HRA purpose?

    1. Srinivas says:

      If you had given a gift to your mother, the money should have gone into her account and show should have paid it to the party.
      If this is already paid by you to the seller, you will be part owner.

      1. TaxPayer says:

        We haven’t shown my name in the registry deed. How do we deal with it now. Can I make an affidavit with signature of my mother and mine for the future reference

        1. You cant show the money given to third party as GIFT as far as I understand it .

  173. Rahul Garg says:

    Dear Manish & other experts here, I have a simple query and believe can be resolved here.
    I want to invest in Equity Mutual Fund SIP in the name of my minor nephew. I just wanted to know the units or the investment value would be shown in my Balance Sheet or my brother-in-law’s, he being the natural guardian to the children.
    Also what’s the treatment that needs to be done when the units are redeemed i.e. in whose income tax file the profit/loss needs to be shown.

    Regards

    1. The units will be shown the name of the person on whose name the investment is done. But the taxation part will happen in your name because he is minor

      1. Rahul Garg says:

        Thanks for replying. From Your comment I come to understand is that the clubbing will not happen to the child’s natural guardian (father) but to the donor (maternal uncle). Hope I have understood you correctly. Regards.

          1. Rahul Garg says:

            Thanks once more!

  174. kanhaiya says:

    Very Good article thanks

    1. Hi kanhaiya

      Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also

      Manish

  175. Manish, Investment in wife’s name under balance fund and redemption after one year will also give same benefits like stock buy and sell, Is this right way ?

  176. Neeraj says:

    Please clarify When you gift to both parents then interest earned by them will not be cubbed to father’s income as per clubbing rule.

    1. Neeraj

      Yes, the interest earned will be fathers income only, because now its their money .

  177. Srinivas says:

    One pertinent point here to note regarding adult children.

    When ever a child becomes adult in a year, he can get the benefit for the full year. If my child becomes adult in Jun 2015, tax exemptions etc can be claimed for the full year 15-16.

    This can be used to advantage in tax planning.

    1. Hey Srinivas

      Thanks for sharing your experience with all of us. It was a great learning.

      Manish

  178. Niket Gupta says:

    I want to subscribe to email newsletter

    1. Hi Niket Gupta

      I subscribed you to email newsletters

      Manish

  179. Muthuraman says:

    I have a query regarding this, How will we declare this gift amount in our ITR form to get the exemption for the donor..

    I am a salaried professional,, filing tax returns using ITR-1 for last 5 years,, Now say, I wanted to gift 1 lakh to my father, how will i declare this in ITR form ??

    My employer would have already deducted the tax using TDS and issued a FORM 16

    Thanks
    Muthuraman

    1. Srinivas says:

      If you are the giver, nothing needs to be one in ITR. There is no tax exemption for the donor of a gift.

      If you are the receiver of the gift, the gift can be declared under other income in exempt category.

      Gift to father is done as an account transfer and keep a copy of gift deed for records.

  180. R K Kaushik says:

    Nice article dear Manish
    plz give more knowledge on mutual funds
    start a fresh new series on mutual funds
    thanks

    1. Hi R K Kaushik

      I will write it soon !

  181. Anil says:

    Nice article on gift. Pl clarify few issues on loan given to own spouse for tax saving purpose:-
    – What is the nominal interest you can charge.
    – Believe income earned on further investment by spouse need not be clubbed in your income.
    – Will whatever interest being received on such loan be required to club in your income.

    Thanks

    1. Hi Anil

      1. 4-5% is good

      2. Thats correct

      3. Interest will be husband income .

      1. Anil says:

        Thanks for clarification. Will any document be required while receiving interest amount for tax filing

  182. Hemraj says:

    Hi,

    very informative website,

    I want to know
    (1) abt AIR (annual information report). I plan to invest nearly 2.5 lac per month. what will be tax implication?

    (2) I would like to gift some amount annually to my unmarried sister (age> 40 yrs) so she can invest it. will the clubbing of income apply? what is the procedure?
    will she have to file incometax return?

    also as I gift her cash on special occasions like Rakshabandhan , her birthday . if she invests it, will the clubbing happen?

    (
    pl guide.

    waiting eagerly for your reply

    1. 1. If you are going to invest our of your white money . Then there is no issue . You always have the explanation incase of any scrutiny !

      2. NO , clubbing will not apply !

      Manish

  183. Happyinvest007 says:

    Hi Manish,

    I’ using trick 2 and invested money on parents name. (Trick #2 – Invest money in your parents name)

    I have invested in FD on my father’s name, but is there any written document or details saying son has gifted money to father? Such document really necessary?

    Thanks.

    1. You have given the money to parents account and then its invested – right ? In that case no documentation !

      1. Happyinvest007 says:

        Yes, I transferred online to my father’s account and then invested with their name in FD.

        1. Great then , you did the right thing

  184. Amit says:

    Hi Manish,

    Great Article… One query, what are the tax implcations on the gift received from fatther in law .

    1/ will it be treated as Gift and no Gift tax applicability ?
    2/ If it a Gift, would the income generated out of this Gift in a particular FY , need to be included in father in law’s hand. the same way like in case of Gift works in husband wife relationship ?

    Regards

    1. Hi Amit

      1. Father in law can gift , it will be tax exempted for you

      2. No ,in this case the whole interest will be your income, clubbing only applies in case of spouse or minor kid !

  185. Vinod says:

    Nice article..worth reading it.

  186. v.r.k. raman says:

    excellent article. pl. clarify the terms -lineal ascendant,lineal descendent. is it parent, grandparent/child/grand child?
    son is settled in U.S.A. The son opens a NRO a/c here in joint -names(son and father) . Father transfers one lakh in that a/c. which is invested ,say, in fixed deposit. The int. amount of Rs.10,000. is it not to be clubbed with that of father’s? Is it taxable for the son?. Can the father withdraw the interest for his expenses?
    v.r. k. raman

    1. Transferring money in joint account is not GIFTING . When we say gift, it has to be given to in person name . In joint account taxation will happen on the first account holder name

      Manish

  187. Abdulkadar says:

    Very good informative article. I have one doubt. Please clarify. Husband (being in 30% income tax slab) has transferred one lakh rupees to wife as gift and the interest earned is 10000 rupees. Wife is in already in income tax slab. Will the ten thousand interest be added with wife’s income or still it will be added with husband’s income irrespective of the income tax slabs of the wife?

    1. No , It will be clubbed with the income of that person whose tax slab is higher ! . So if wife is also in 30% slab, it will be considered wife income, else husband !

  188. krajiv26 says:

    awesome way to make understand the complicated thing. Keep it up

    1. Hi Rajiv

      Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also

      Manish

  189. Abhijit says:

    Excellent initiative as always Manish…thanks for sharing these less known ideas to save tax. Grateful!

    1. Hi Abhijit

      Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also

      Manish

  190. SUKHDEV GUPTA says:

    If husband transferred online in wife’s account in F.Y. 2012-13 and wife further invested in FD and earned interest 80,0000 in F.Y. In principle this interest is to be clubbed in husband’s income for A.Y. 2013-14. But, what about for the subsequent years in case of interest earned in wife’s FD for FY 2013-14,2014-15 and so on. Pl suggest.

    1. Each year the interest amount will be clubbed in husband income, only the interest on interest is wife income !

      1. Srinivas says:

        The clubbing provision was put to avoid under reporting of income by one spouse, to take advantage of partner’s lower tax slab. Once the income is clubbed in the first year, the same will become taxed income from next year on and may not need to be clubbed again for the subsequent years.

        Also, once in wife’s account in the previous year, taxman may not go back in the past and check the origin of the funds.

        Thus I feel that it is logical that clubbing is done for the first year only.

        1. Hi Srinivas

          Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also

          Manish

  191. Pradeep says:

    I am depositing Rs 10,000/- per month in my wife’s Bank account to be further invested in monthly Bank RD. I am not depositing this money online but in cash every month in her bank account. Now is it possible for me to show it as Wife’s Income (can be from any source, for example gifts collected from relatives or an income from teaching children at home) as her bank account in not linked to my bank account in any way. In this way, can I save income tax on the interest generated on the RD?

    1. Yes Pradeep

      In this case, there is no link between you and your wife transactions . So she can show it as INCOME . Just that her total income should not exceed Rs 2.5 lacs, else she will have to pay income tax on it . If it was a transfer from you, then she was not suppose to pay any income tax !

      Manish

  192. SUDO says:

    Dear Reader,

    I had invested in ELSS funds in 2009. Under what section dividends received on these ELSS funds is exempted?

    Regards,
    GSR

    1. I am not able to recollect the exact section, but I am 100% sure that dividends are tax free

      1. SUDO says:

        Thanks for your time and reply.
        Now my employer is suggesting to declare under 😯 C. In that case we will be losing some amount that is the reason I am asking here.

        Regards,
        GSR

  193. vipan mahajan says:

    Hello Manish,
    Are you sure clubbing provision do not apply if gift is made to parents or major son.
    pl confirm. If so any other such relation.

    1. Yes Vipan

      100% sure 🙂 . No other relation is applicable . ONly parents and Major Children ! . THis is confirmed. The article is written by a CA 🙂 .

      Manish

      1. vipan mahajan says:

        thanks Manish

      2. vipan mahajan says:

        Dear Manish,
        If I deposit amount in my wife’s ppf account, how clubbing will apply as intt on ppf is exempt.

        1. mahesh says:

          according to my knowledge in this case cluubbing will not work…..!!!!

          1. vipan mahajan says:

            Manish, seems to be not sure type of reply.

            1. I didnt get what you want to say Vipin !

        2. Correct, in that case, clubbing will not apply . Thats exactly what article teaches .

  194. vinay kr singh says:

    I am investing in PPF 1.5 LAKH,AND MY WIFE IS HOUSEWIFE,IN HER NAME ANOTHER PPF ACCOUNT ,SHE INVEST SAME AMOUNT ,AS FROM MY INCOME, IS IT RIGHT,

    1. If there is a direct link that the money is getting invested from your account, then its not allowed. But if she is investing it from her account, then its fine !

      1. A.Sundaram says:

        Dear Manish,

        I don’t think there’s any bar on investing into the PPF A/c of wife from husband’s A/c (in addition to the investment by the husband in his own PPF A/c).The interest earned by the wife for the first year on each contribution would get clubbed with that of the husband but since it’s a tax-free interest,no additional tax liability will arise on the husband.

        1. I guess I mentioned that in article that if money is invested in tax free instruments, then clubbing does not apply !

  195. AJ says:

    Hi,

    Good one . Can you be a bit more specific on what your mean by transfer to spouce/relatives. Do I need to maintain some agreement to second this or just online transfer to their account will do ?

    1. Just transfer the money online – That will be enough !

  196. Y P Gupta says:

    I relish reading beautiful articles from Jago Investor and this is one of the great wonderful sharing for tipping to save money legally. Greatttt.

  197. C.Kailash says:

    good suggestion for timely tax planning

  198. Dishant Verma says:

    If I gift 2 lakh rupees to my friend , does it will add to his/her income ?

    1. Dishant . There are two scenarios’s here .

      Scenario 1 – If you are giving this 2 lacs just as a loan and will take it back later and if he really gives it back to you. Then you dont need to do anything . Its a give and take transaction.

      Scenario 2 – But suppose you give this 2 lacs like gift and there is no reverse entry. then YES – it will be considered his income and he has to pay tax on that !

      Manish

  199. Bharani says:

    Excellent article. Never read these insights anywhere before! Sparsely explored subject I think 🙂

    1. I know 🙂 .. thanks for your comment !

  200. Pratish says:

    Hi Rishabh Parakh,
    Thanks for an excellent article! it is indeed helpful! One question i have for you, i hope you can help me with it.
    my friend has a flat which he inherited from his late father. The flat is in Joint name of his mother and him! they have society share certificates too! Now he wants to sell this flat and buy a new flat!
    Is it possible that his mother gifts him her share of flat and when he receives the compensation, he can invest full amount in his new flat without his mother being part of the deal! if yes, then can you tell me what are the tax implications to both mother and son
    your reply will be highly appreciated!

    1. Yes, his mother can surely gift the whole thing to son ..

      Manish

  201. Ramesh says:

    Can we give any amount of money as gift to our parents?

  202. Madhab says:

    Thanks for the article!
    I have been doing the same, but I was worried whether what I am doing is legal.
    It is good to know its all fair and legal.

    I am saving on my mom’s name.

    I have only one doubt though, suppose the FD on my mom’s name matures and she transfers that money to my account. What are my tax liability?

    I am hoping no liability since it is again a gift from her to me.

    Correct me if I am wrong.

    1. Romit Chhabra says:

      Hi madhab,

      M not an expert but according to the article if a person give gift to his child who is above 18 then the gift will be child’s income and income from gift will also be that of child’s. Unless the gift is given on child’s marriage as pointed out by Santanu. So in your case it should be added to your income as per my understanding.

    2. I will have to check this with Rishabh .. I will get back to you !

      1. karri says:

        Any info on this Manish.
        Basically I have the same question. I gifted money to my parents for saving tax. Then after some years, they gifted it back to me. Do I have to pay tax on the money I received ?

        1. You cant do that, its a clear cycle transaction . You cant take benefit of the gift tax rules like this . It has to be earned by your parents if you want to save tax !

  203. Anurag Kumar Gupta says:

    Dear Manish Ji,
    Thanks a lot for your valuable articles. I appreciate your jagoinvester app. Please launch this app for ios & windows also.

    with Regards

    1. Yes Anurag

      Give us some time. We will do that soon !

  204. RAMESH CHAHARIA says:

    on gift transactions good idea given and clears all the provisions relating to saving of gift tax as well as incometax by proper planning of gift made amongst family members

  205. sharath Mumbai says:

    Very useful information Rishabh.
    I have a question – In case of investing in property in parent’s name, All we need to do is register the property on their name right? I can still be the person taking loan on it and paying EMI? In this case, can I still avail Section 24 ( Home loan interest benefits and 80C principal benefit)? Are there any other things that need to be considered that are ignored generally?

    1. Bahubali says:

      To avail Home loan interest benefits and 80C principal benefit , the property should be registered on your name and also the loan must be in your name. Then only the benefits can be claimed.

      Still a question remains here – How the property to be gifted to parents so that tax liabilities are minimized. ?

      1. Sameer Bane says:

        I think here we are talking about investing surplus money that we have. That surplus money can be gifted to parents and save tax.
        Home loan is different thing where in order to take tax benefit, flat and home loan should be on your own name.

      2. If loan is going on in your name, then transferring the property will not help .

        But if do not have home loan going on , then gifting it to parents would mean that you can collect the rent in parents name and it will be their property.

        Manish

        1. Bahubali says:

          Thanks.!

    2. No Sarath

      You cant do that . You need to have the home in you name only.

      When we said “gifting property to parents” , it was mainly a property which is not on loan , or we didnt consider the loan thing in mind. And the main tax advantage is that the rent can be collected in parents name and no tax will be there if parents dont have any additional income !

      Manish

  206. rajendra says:

    Hi,

    Thanks for the article.
    I have a query regarding this article.
    how can you show the money given to your relative as gift ?
    What about brothers and sisters does money loan given to them will be like given to parents or wife?

    Thanks in advance

    1. When you transfer the money to their account, its a GIFT ! .

  207. Santanu says:

    I think in this rule we need some change. E.g. amount given on marriage is not at all taxable? I believe this is simply encouraging dowry system and black money in our country. We can see in South India where people are demanding lakhs and crores of money on marriage. This also should be considered as normal gifting rule and also should be taxable.

    1. Romit Chhabra says:

      Nice point Santanu. I was searching for like button after reading it. You should add it if possible Manish.

      1. Santanu says:

        Thanks Romit. But this is really sad the our law has so many loop holes.

    2. Thanks for sharing your views Shantanu.

    3. Jeba says:

      Dowry is asked before marriage.. Until the marriage happens the couples are not husband and wife. So would be wife can’t “gift” the money. It would still be considered as money (income) from other sources.
      So it is pretty much taxable.

      If the “gift” or “dowry” is paid after marriage, that’s another debate..

  208. A.Sundaram says:

    Thanks,dear Manish and Rishabh,for this insightful article.One query please- What would be the tax implications when gift is given to daughter-in-law- 1) by father-in-law and 2) by mother-in-law? Thanks.

    1. The same, its her property 100%

      1. A.Sundaram says:

        I’m afraid that’s not correct,dear Manish.
        U/s 64(1)(vi),the income earned by the D-in-law from the transferred asset will get clubbed with the income of the transferor.

        1. Vishal Sanghvi says:

          Dear Manish, Could you update on the comment made by Mr.A Sundram i.e. section 64(1)(vi) … amount gifted by father in law to daughter in law. Thanks!

        2. But thats only if its not from a relative ! . As per various online sources , its written that the father in law can gift to daughter in law !

          1. A.Sundaram says:

            Father-in-law can certainly gift to the daughter-in-law but the income earned from the gifted amount would be clubbed with the income of the F-in-law as per the clubbing provisions.

            1. Ok thanks for sharing that.

  209. NIRANJAN DESHPANDE says:

    I have same question as Senthil.

    Anyway thanks a lot for this article. Feel connected with it as I am in similar situation. Fortunately bhad gifted to my mother, so should be safe 🙂

    1. Yes, any thing you gift to your mom, should be her property !

  210. Is there a specific way by which we mark this money transfer as a gift? Is there any documentation to mark the money as gift? Or a bank transfer with ‘gift’ in comment will do?

    1. Santanu says:

      Hi Senthil,

      I think there is something called Gift Deed which can be executed for large transactions. Otherwise a simple declaration in a white paper white paper with both parties signature will also work as a proof of gift. If the amount of gift is more than 50,000 then it is always advised to take a proof of money transfer.

      Hi Manish, Can you please correct me if I am wrong. One more thing is that if someone transfer money via online, I think that bank statement should also work as a proof.

      What do you say Manish on that?

      1. Yes thats correct. As per Rishabh (the writer of this article) . What matters at the end is that you need to show the proof of all transactions . If its online done, then you dont need the gift deed. For offline transactions like someone giving you a GIFT of 2 lacs or lets say someone gives you a car worth Rs 5 lacs, then you should take a gift deed prepared, because only verbal saying will not work there !

        Manish

    2. Simple Bank transfer should do ! .. no requirement of even mentioning !

  211. Great Article….Thank you for sharing it.

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe to Emails

More than 1,50,000 investors across the world trust & read Jagoinvetor articles. Subscribe for emails updates and get instant access to a free ebook.

Jagoinvestor is one of the most trusted personal finance websites which writes on various topics like financial planning, mutual funds, insurance and banking.

 

Download Our FREE Ebook!

Available only for first 100 people today

Download Our FREE Ebook!

Available only for first 100 people today