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An Insight to Tax Planning Your Gifts

An individual can preferably get one affidavit listing all such gifts in the entire assessment year from different or the same relative. The individual will hence reduce the trouble of preparing an affidavit each time he receives a gift.

During the assessment of the l-T returns, the affidavit will save you from the hassles of proving the gift both movable and immovable, being received or inherited from any relative residing in any part of the world. It will also establish the donee’s relationship with the donor.

Assesses will have to file Income Tax dues on the value of the gift and disclose the taxable value of such property in the return of income.

On wedding day, gift received from anyone (relatives or not) would not fall under “Gift” and not taxable under income tax. Money received under “WILL”, by way of inheritance, and benefits from employer for the service to the employee or to the dependent in his absence also will not be treated as Gift taxable under Income Tax.

Tax Planning Hints:

1.      No Tax benefits arise in gifting to your Spouse or minor children or daughter-in- law as income will be clubbed in (the hands of the donor) your hands.

On gifting to others, being RELATIVES as defined under the Income Tax Act, the income arising there from shall not be clubbed under your hands.

2.       You may accept cross gifts upto Rs. 50,000 in favour of Yourselves, your Spouse & Minor children from non- relatives.

3.       Premarital Transfers: Gift to the fiancée before the marriage will not attract the clubbing provisions. The relationship of husband and wife must subsist not only at the time of the accrual of income from the gifted asset but also when the transfer of assets is made. Similarly, gift may be made by father-in-law / mother-in-law to the prospective daughter-in-law.

4.       Will can be made in favour of the wife of person who writes the will (and also son’s wife) without attracting the clubbing provisions.

5.       Incomes emanating from accretions to  assets transferred for inadequate consideration do not attract clubbing  provisions. E.g.: Mr. A gifts his shares  in a prosperous company to his wife,  which subsequently gets multiplied manifold, then dividends and capital gains arising on transfer of bonus/right shares acquired by Mrs. A will not be clubbed in the hands of Mr. A. It is only with respect to the original shares that clubbing provisions will be applied.

6.       Avoid employment of a spouse in a concern in which the other has a substantial interest. Instead, enter into a partnership with spouse providing salary with nominal share income for one and interest plus major share income for the other.

7.       Do not give gift to your minor child. Avoid gifts from outsiders too, as any income arising to the minor shall be clubbed in the income of parent.

8.       Transfer of assets to a minor under a will, should be made in such a manner that income from assets accrue to him only when he becomes adult. In such a situation, the clubbing provision will not arise



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