Tax treatment of FD

This query is : Resolved

Sachin Jain (Querist)
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13 November 2007 Hi,

I have one FD of Rs.50,000.00 for which i have claimed deduction u/s 80c and now i want to gift it to someone in blood relation.

1. Can i do so?
2. What will the tax treatment in my hand and on the hand of the receiver?
3. Will there be any difference in your opinion if donee encash FD only after the fixed period?

Suresh Agrawal

Suresh Agrawal (Expert)
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13 November 2007 1. You can always gift. Nobody will stop you.
2. It will become taxable in your hand in the year u gift becuase u availed 80C deduction on legal presumption that u will remain invested for 5 years.
In the hands of recipient relative it will not be taxable u/s 56(2)(vi).

3. Encashment does not affect taxability.

K V Subba Rao

K V Subba Rao (Expert)
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14 November 2007 I don't think it is possible to change the name on the Fixed Deposit Receipt to give effect to your wish of gifing the FD to your blood relation except by cancelling or pre-maturing the FD.

The moment you cancel or pre-mature the FD, consequences as detailed by Sri Suresh Agrawal will follow for IT purpose.

Perhaps, (a)you could opt to change the name of the Nominee in favour of blood relation to whom you intend to gift, (b)write your endorsement of gifting to your blood relation on a piece of paper preferably under witness of two other relations (if you are confident of not suffering their displeasure) and (c)attach it to the FD Certificate and handover possession of the FD Certificate to your blood relation.

The above course of action would accomplish your wish of gifting and also at the same time will not lead to any taxation problems

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Amarjeet Singh

Amarjeet Singh (Expert)
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14 November 2007 Any income which will accrue on this FD will be taxable in ur hand if u gift it to the persons metioned U/s 64 .iF U GIFT IT TO THE PERSONS OTHER THAN ABOVEMENTIONED PERSONS DEDUCTION u/s 80C WITHDRAW & THIS WILL BE ADDED TO UR TOTAL INCOME FOR THE p.y IN WHICH U HAVE CLAIMED THE DEDUCTION.