Please explain rebate on gift…..

POSTED BY Nilesh K ON July 18, 2011 3:27 pm COMMENTS (4)

Please can anyone explain in detail about Gift and rebate on the cash gift that is given to the relatives? 

1. Can i give more than 50K to my fahter/mother and get tax rebate on it?

2. Is rebate applicable to gift for non-relatives?

3. Money Today (July issue) states that if you’ve 80+yrs old parents and tow major daughters, you can gift around 1.88 crore in cash and save aroun 10-15lac in tax. is it true?

4 replies on this article “Please explain rebate on gift…..”

  1. ashal jauhari says:

    Dear Nilesh, You are confusing yourself with the article quoted by you. Let me explain the concept of indirect Tax saving.

    Say you are already earning salary income in 30% Tax slab & at the same time you do have bank FDs of 10L Rs. Now as you know already that the bank FD interest is fully taxable, hence you w’d have to pay same 30% Tax on bank FD interest.

    Now if you opt to gift this 10L Rs. amount to your mother or Father who are out of tax net for not having enough income & now same bank FD is under his or her name, the Interest ‘ll accrue to him/her & accordingly no tax on that income as they are in zero tax limit.

    From the above example – you may notice that there is an indirect tax saving for you on the bank FD interest if the interest is accrued under your parent’s name & not your’s.

    Please feel free to ask if you need more help.

    Thanks

    Ashal

    1. Nilesh K says:

      Ohh ho! And I was wondering is it possible to reduce taxable income just by transferring cash to your parents! So there is no such section available in income tax act like 80C, 80CC/D for gift amount and you can save tax on retruns by investing the amount through parents.

      Is my understanding correct now?

  2. Nilesh

    You can never save tax by gifting it . Only a person who is recieving the gift can save some tax , but again that saving tax means “not paying tax on the amount of gift recieved” .

    3. What you heard on Money Today was restructuring of your portfolio . You can gift money to your Parents and the income which gets generated out of it will become your parents income , they wont have to pay the tax on that amount if its less than the limit . But if it was with you , you would have paid tax.

    Manish

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