Will I have to pay tax if my parents gift me Rs 20 lakh? If you have a query, mail it to us right away
My parents, aged 70 and 65, recently sold a part of their agricultural land. They plan to use the proceeds from the sale for their retirement, and have also decided to gift Rs 20 lakh to me. Will I face any tax liabilities if I accept this gift from my parents? Additionally, what steps can I take to ensure a smooth transaction without any unnecessary tax complications? Is there a specific certificate or document I need to submit as proof of the gift?Shubham Agrawal Senior Taxation Adviser, TaxFile.in: A gift from parents is exempt from income tax under Section 56(2) of the Income Tax Act. Therefore, you will not bear any tax liability on the Rs 20 lakh gift. While it’s not mandatory, it is advisable to execute a gift deed mentioning the amount, relationship, and the fact that the gift is irrevocable. Accepting the amount through a bank transfer ensures a clear financial trail. Since income tax returns are annexure-less, you don’t need to submit any documents, but keeping the gift deed for personal records is recommended for any future reference.
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My father wants to donate a large sum to a community hospital. However, he first wants to gift this amount to me and then have the donation made by me in my name. Can he gift the money to me without any tax implications to either party? Can I claim tax exemption if the donation to the hospital qualifies for an exemption?
Amit Maheshwari Tax Partner, AKM Global: As per the provisions mentioned in Section 56(2)(x) of the Income Tax Act, 1961, any sum received as a gift from a relative, including fathers, is exempt from tax. Hence, you will not be taxed on this amount. Your father, too, will not face any tax implications on making this gift. Regarding the tax deduction for donations, Section 80G of the Act allows deductions for contributions made to eligible charitable institutions, provided they are registered under Section 80G. If the community hospital qualifies under this provision, you will be eligible to claim a deduction for the donation. The percentage of deduction will depend on the category of the recipient institution. Certain government or national relief funds qualify for a 100% deduction without any limit. Other eligible institutions may qualify for a 50% deduction, subject to a qualifying limit of 10% of the adjusted total income. To claim deduction, the donation must be made through prescribed payment modes. Donations exceeding Rs 2,000 must be made via non-cash methods, such as a cheque, bank transfer or digital payments. Cash donations beyond this threshold are not eligible for deduction. Besides, deduction under Section 80G is available only under the old tax regime, not the new regime. So, while you can claim deduction for the donation if the hospital is registered under Section 80G, you must ensure compliance with the prescribed payment method and tax regime selection to avail of the benefit. The tax department may put this up for scrutiny. So, it is advisable to consult a financial adviser before making a donation.
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This story originally appeared on: India Times - Author:Faqs of Insurances
