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Gift to ......

Pankaj (Manager) (295 Points)

24 January 2010

Hi.......................

If Father has given RS 1500000/- to his son. & He has deposited this amt in bank as F D.

Son has received interest Rs 200000/- for half year. then he start the new business with Rs 200000/-. & he get Rs 100000/- business profit.

What is the tax liability about Rs 200000/-( Interest) & Rs 100000/-( Business Profit) ?

Please any one explain me .................................

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3 Replies

AHAMED. B (3 'C' - Final) (273 Points)
Replied 24 January 2010

Cash gifts recd from relatives are exempt from tax.. If not from relative its taxable u/s 56(2)(vi) under the Head Other Sources..

Here, gift from father is not taxable. But FD interest (Rs.2 lacs) is taxable. If the son is a major then both busi profit and fd int are taxable in his hands.

We shall assume the son to be a minor son. Hence clubbing provisions wil attract. FD interest is to be clubbed with the father's income u/s 64(1a).. He can claim exemption upto Rs.1500.

The business profit has been made by the minor son out of his own business knowledge. Hence this shud not be clubbed. Its taxable in the hands of the minor son only..

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@ CA. $ahar$h @ (Student) (338 Points)
Replied 24 January 2010

Dear pankaj,

Clubbing provision relating to your case are applicable only for spouse or son's wofe. since in your case father has given money as GIFT to his son so any income from the same shall not be clubbed in the income of the father.the whole amount of Rs.1500000 will be exempt in the hands of the son.further the interest from fd will be taxable in sons hands under the head other source. The business profits will also be taxable in sons hands.Father ji has got nothing to do with any sum of money.

However in case of scrutiny under section 143(2) the source of Rs. 1500000 can be asked by ITO.

manish (Article Assitant) (358 Points)
Replied 25 January 2010

I Agree with Saharsh 'Hellrokr' only Interest & Business income amount are taxable in the hand of son. And interest income is taxable under head other source and Business income are taxable in the hand of PGBP. And ITO may ask about the source of Rs. 15,00,000/- but it is not matter with the sons income. but it is transfer to son from father. and 15,00,000 was the income of father.