GIFTS RECEIVED FROM RELATIVES ARE EXEMPT FROM TAX:

GIFTS RECEIVED FROM RELATIVES ARE EXEMPT FROM TAX:

Any amount received from specified relatives is totally tax free in the hands of recipient. So if a relative gives you gift in form of cash/cheque or in consideration, you will not have to pay any tax on the amount received.

Following is the list of relations which are considered as “relatives” for this

·         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 if you want to buy a house and your father/mother/sister/brother etc transfer Rs 20 lacs to your bank account. You don’t need to worry about the taxation part, because its a gift from your relatives and you will not have to pay any tax on this amount. However its a good practice to do the documentation for this, if the amount if pretty big like in this example. All you need to do is document this transaction on a paper which clearly states that who transferred the money and the reason for it, along with the signatures of both parties. In future, if there is any income tax scrutiny, this small piece of proof will be handy and will help you a lot.

Here it is however important to understand that that though, there is no income tax to be paid on the money received from relatives, however at times income clubbing provisions may apply, that is to say that, if a husband gifts Rs 10,00,000 to wife, there is no tax to be paid by wife on Rs 10 lacs received, but when the wife invests that money the interest income if any generated on such investment will be clubbed with husband’s income.

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