25 July 2024
In India, gifts received by minors are subject to specific tax rules under the Income Tax Act, 1961. Here’s a detailed explanation regarding how much gift a minor can receive and its tax implications:
### Gift Amount Limit:
1. **Exemption Limit**: - Under Section 56(2)(x) of the Income Tax Act, any sum of money or property received by an individual, including a minor, without consideration is considered as income under the head "Income from Other Sources". - However, there are exemptions available: - Gifts received from specified relatives are exempt. Specified relatives include parents, siblings, spouse, grandparents, and lineal descendants or ancestors of the individual. - Gifts received on occasions like marriage, through a will or inheritance, or in contemplation of death of the payer are also exempt.
2. **Amount Exempt**: - There is no specific limit on the amount that can be received as a gift by a minor from specified relatives without attracting income tax. - Therefore, gifts received from parents or other specified relatives are generally not taxable in the hands of the minor.
### Tax Implications for Parents:
1. **Clubbing Provisions**: - The Income Tax Act has provisions under Section 64(1A) which state that if any income arises to a minor child from assets transferred directly or indirectly by a parent (other than the minor child’s spouse) to the minor child, then such income shall be included in the income of the parent whose total income is greater. - However, this provision does not apply to income arising from gifts received from specified relatives.
### Example:
- **Scenario**: A minor child receives Rs. 5 lakhs as a gift from their grandparents. - **Tax Implication**: - Since grandparents are specified relatives, the gift amount of Rs. 5 lakhs is exempt from income tax in the hands of the minor. - The parents do not need to include this amount in their income under the clubbing provisions, as it is received from a specified relative.
### Conclusion:
- Minors can receive unlimited amounts as gifts from specified relatives (such as parents, grandparents, etc.) without attracting income tax. - Such gifts are not taxable in the hands of the minor, nor are they required to be clubbed with the income of the parents. - It’s advisable to maintain proper documentation and evidence of the gift transaction to substantiate the source and nature of the gift received, in case of any scrutiny by tax authorities.
For specific cases or larger amounts, consulting with a tax advisor or chartered accountant would be beneficial to ensure compliance with tax laws and optimize tax planning strategies.
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