Understanding Income Tax View for Common Situations

POSTED BY cpdhutadmal ON February 12, 2012 9:45 pm COMMENTS (16)

Dear All,

Kindly let me know how would Income Tax department will view these Transactions.

1. If i withdraw some amount from one Savings account and Deposit in another, will that be considered as additional income and have to pay income tax for that ?

2. Family members (Father/ Mother/ Spouse, etc) transfer (NEFT or otherwise) money from their account to my account, how will that be considered, what about tax?

3. If a friend transfers money to my account (NEFT or otherwise), then how would it be considered?

Regards,
Chandrakant D.

16 replies on this article “Understanding Income Tax View for Common Situations”

  1. Sathish kumar says:

    Regarding high value transaction .
    As there is a rule from April 2016 that bank should report all high value transaction aggregating Rs 10 lakh in a year ,

    my query is whether cash deposit at bank only or fund transfer made through internet banking also is reported?

  2. Sathish kumad says:

    I have some query regarding fund transfer to own account.
    For example:
    I am unemployed no source of income and at present I have only 1 lakh rupee.I have two bank account one at central bank and other at syndicate bank.i made fund transfer of Rs one lakh from central to syndicate bank and from syndicate to central bank for more than 15 times which means in both bank the total fund in and out is 15 lakhs in a year but actual amount I have is Rs 1 lakh .Will the bank report it as high valu transaction?.
    Will income tax dept. track itself that it is my account or I have provide any proof?

    1. No , dont worry . Those transfers are interbank transfer which does not matter

      1. Sathish kumar says:

        Since bank doesn’t know who is sending this money will they report to income tax?
        Only the income tax department may know since pan card is linked with it.

        1. No , it does not happen like that. Banks have your PAN and it has track of everything. DOnt worry on this . If there is enquiry, you can always show them that its a interbank transfer.

  3. Sumit says:

    Can I receive a gift amount through NEFT?.. Or else gifting through cheque is mandatory?

    Regards
    Sumit

  4. Dear Raja, in general these transfers ‘ll be treated as your gift to your parents if you can prove so. Else it ‘ll be treated as your money & any income generated from this money may be treated as your income.

    On your part, you may gift part amount & keep part amount meant for general use. For the gift amount, please prepare a gift deed on a plain paper as mentioned above in one of the reply.

    Thanks

    Ashal

  5. Raja says:

    Ashal,

    Thank you so much for the detailed explanation. I have a small doubt here.

    Most of the NRI’s are transferring money directly from their foreign bank account to the Parents bank account in India.
    > How this money will be treated? Will it be treated as gift ?
    > Are there any Income tax rules for these kinda of transfers to be followed while parents are filing their income tax?
    > How IT department will track these transactions ?

    I’m not sure whether this is the right place to put this question. Appreciate for your answers.

  6. Dear Chandrakant, please avoid such practices of paying your credit card bill from other’s account or vice verse.

    In case you are short of funds & you bills are paid by another person. Please return the amount as soon as possible through cheque or net transfer.

    Thanks

    Ashal

  7. Dear Chandrakant, For a loan, you w’d have to prepare a loan deed on a stamp paper. The loan deed specifically mentioned the details of lender, borrower, amount of loan, duration of loan, interest rate etc.

    Thanks

    Ashal

  8. BanyanFA says:

    Hi Chandrakant,
    One more point in addition to Ashal’s excellent explanation. Avoid as much as possible cash deposits / withdrawals from your bank account – even if it withdrawn from your one saving account and deposited into your another saving account. The moment cash comes into the picture, it looses the trail and adds to suspicion. Any cash transaction beyond 50K are also reported to Income Tax Department by the respective Bank. Though you would fare well if your file is picked up in Income Tax scrutiny, however it involves a lot of stress and a lot of avoidable expenses.

    Regards
    BFA

  9. Dear Chandrakant, I’m trying to answer your query.

    1. If you are transferring money from your account A to account B, no it’s merely funds transfer within your own funds & not an income to you, hence no tax at all.

    2. If your mother or father is giving you money as a gift, it’s your capital now & you are free to use it as per your choice & no tax on this gifted money, received from your parents. But for the gift money received from your spouse ‘ll invite clubbing provisions of section 64. According to this section, if you are earning a taxable income (say money is invested in bank FDs), the income ‘ll not be clubbed with your income. It ‘ll be treated as your spouse’s income & ‘ll be taxed under her name. Yes income generated from the income i.e. interest received from the FD in the above example & reinvested elsewhere, ‘ll be your taxable income.

    3. If your friend/s is/are giving your gift amount of total add up value of more than 50K in a FY, it ‘ll be treated as your income & you ‘ll be taxed on this gifted amount as per your tax slab.

    Thanks

    Ashal

    1. cpdhutadmal@yahoo.com says:

      Hi Ashish,

      Thanks for the reply. I have some doubts related to your answer.

      1. How do we complete formality of a Gift Amount from parents/ Friends ? I mean do we maintain any documents for that ?

      2. If it is not a Gift from Parents or Friends, but as a Loan amount, What documents to maintain and how to calculate tax ?

      3. What happens in case payments of my credit cards are payed through cheque by either parents or spouse ?

      Regards
      Chandrakant D.

      1. Dear Chandrakant, Here I’m trying to answer you again.

        1. A gift deed on plain paper ‘ll do. Right down the details like I (your father) is giving a gift of amount ————– to my son (Your name) out of natural love & affection & from now onwards He (You) is free to use this amount as per his (Your) choice. The amount is gifted vide cheque no. ___________ of Bank ____________ dated _________.

        Signed by donor (Your father) & you ‘ll sign with writing over your signature that I’m accepting the gift.

        A plain paper gift deed. No special stamp paper or registration is required.

        Your father/mother may gift any amount to you subject to their known source of income.

        Thanks

        Ashal

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