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Income Tax and limits for retired couple

Sunder (Manager) (95 Points)

31 December 2009

Can the experts here please comment on the following situation:

This is for a retired couple and all the accounts (Bank, ...etc...) are held jointly. The lady does not have any income other than the accounts held jointly. Now their daughter wants to invest in the names of her mother. Under these circumstanes, will the "Nil" tax rate for income upto Rs.190000 still holds good?

Thank You

Sunder

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6 Replies

CA Pramod Jain (manager finance) (1577 Points)
Replied 03 January 2010

ya there is no harm in it just make sure investment should be made through ladfy's account and shiow some income like teaching and all that for return in addition to investment income till max alloable limit

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Amir (Learner) (4016 Points)
Replied 03 January 2010

Dear Sunder,

A DAUGHTER CAN STRAIGHTAWAY GIVE GIFTS TO THEIR PARENTS...NO STOPPING UNDER INCOME TAX ACT...I MEAN THE PROVISIONS OF CLUBBING OF INCOME WILL NOT ATTRACT IN THIS CASE...

AS FAR AS SLAB OF 1,90,000 IS CONCERNED IT HOLDS GOOD UNDER ALL CIRCUMSTANCES EXCEPT INCASE OF WINNING FROM LOTTRIES, ETC IS CONCERNED SINCE SUCH INCOMES IS TAXABLE IRRESPECTIVE OF UR SLAB..

Sunder (Manager) (95 Points)
Replied 04 January 2010

Originally posted by : Amir
	Dear Sunder, A DAUGHTER CAN STRAIGHTAWAY GIVE GIFTS TO THEIR PARENTS...NO STOPPING UNDER INCOME TAX ACT...I MEAN THE PROVISIONS OF CLUBBING OF INCOME WILL NOT ATTRACT IN THIS CASE... AS FAR AS SLAB OF 1,90,000 IS CONCERNED IT HOLDS GOOD UNDER ALL CIRCUMSTANCES EXCEPT INCASE OF WINNING FROM LOTTRIES, ETC IS CONCERNED SINCE SUCH INCOMES IS TAXABLE IRRESPECTIVE OF UR SLAB..

Thanks for both replies. But this is where my doubt is and here is hypothetical case:

Income from joint accounts (Father+Mother) = 200000 (2 Lakhs), For this Father files taxes with his PAN number.

Income from sole account (owned by Mother) = 190000 (One Lakh Ninety thousand))

Under the circumstances, Is the Mother's income is 390000 (Joint account+sole) or 190000 (since taxes for 200000 are paid by Father and she need not pay any taxes wince 190000 is the limit).

Thank You

Sunder

Amir (Learner) (4016 Points)
Replied 04 January 2010

DEAR SUNDER,

THE ANSWER TO QUERY WILL DEPEND UPON THE SOURCE OF THE FUNDS LYING IN TWO ACCOUNTS...

CASE 1 - ENTIRE FUNDS IN BOTH A/C'S BELONGS TO FATHER

THIS COULD BE THE CASE WHERE MOTHER HAS BEEN A HOUSE MAKER AND NO FUNDS IS GIFTED TO HER BY HER CHILDREN AND FATHER HAS ACCULMULATED THESE FUNDS OUT OF HIS INCOME OR GIFTS RECEIVED FROM HIS CHILDREN...

IN THIS CASE ENTIRE INCOME (FROM A/C "A" AS WELL AS"B") WILL BE TAXABLE IN THE HANDS OF FATHER..

CASE 2 - FUNDS IN A/C "A" BELONGS TO FATHER AND IN A/C "B" BELONGS TO MOTHER

THIS COULD BE THE CASE WHERE CHILDREN HAS GIFTED MONEY TO THEIR MOTHER..

IN THIS CASE INCOME FROM A/C "A" WILL BE TAXABLE IN THE HANDS OF FATHER AND INCOME FROM A/C "B" WILL BE TAXABLE IN THE HANDS OF "MOTHER"

CASE 3 - ENTIRE FUNDS IN BOTH A/C'S BELONGS TO MOTHER

THIS COULD BE THE CASE WHERE CHILDREN HAS GIFTED ENTIRE FUNDS TO THE MOTHER OR MOTHER HAS IT'S OWN SOURCE OF INCOME..

IN THIS CASE ENTIRE INCOME (FROM A/C "A" AS WELL AS"B") WILL BE TAXABLE IN THE HANDS OF MOTEHR..

1 Like

Sunder (Manager) (95 Points)
Replied 04 January 2010

Originally posted by : Amir

DEAR SUNDER,

THE ANSWER TO QUERY WILL DEPEND UPON THE SOURCE OF THE FUNDS LYING IN TWO ACCOUNTS...

CASE 1 - ENTIRE FUNDS IN BOTH A/C'S BELONGS TO FATHER

THIS COULD BE THE CASE WHERE MOTHER HAS BEEN A HOUSE MAKER AND NO FUNDS IS GIFTED TO HER BY HER CHILDREN AND FATHER HAS ACCULMULATED THESE FUNDS OUT OF HIS INCOME OR GIFTS RECEIVED FROM HIS CHILDREN...

IN THIS CASE ENTIRE INCOME (FROM A/C "A" AS WELL AS"B") WILL BE TAXABLE IN THE HANDS OF FATHER..

CASE 2 - FUNDS IN A/C "A" BELONGS TO FATHER AND IN A/C "B" BELONGS TO MOTHER

THIS COULD BE THE CASE WHERE CHILDREN HAS GIFTED MONEY TO THEIR MOTHER..

IN THIS CASE INCOME FROM A/C "A" WILL BE TAXABLE IN THE HANDS OF FATHER AND INCOME FROM A/C "B" WILL BE TAXABLE IN THE HANDS OF "MOTHER"

CASE 3 - ENTIRE FUNDS IN BOTH A/C'S BELONGS TO MOTHER

THIS COULD BE THE CASE WHERE CHILDREN HAS GIFTED ENTIRE FUNDS TO THE MOTHER OR MOTHER HAS IT'S OWN SOURCE OF INCOME..

IN THIS CASE ENTIRE INCOME (FROM A/C "A" AS WELL AS"B") WILL BE TAXABLE IN THE HANDS OF MOTEHR..

Dear Amir,

Thanks for the reply:

So it seems source of funds are more important than having account jointly having both PAN numbers in the Account records. Do you have any references for the above that can be read by me?

I worked in USA for a while and tax treatment in the above situation will be different.

I appreciate all your help.

Sunder

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Amir (Learner) (4016 Points)
Replied 04 January 2010

Dear Sunder,

U HIT THE BULLS EYE BY SAYING THAT SOURCE OF FUNDS IS MORE IMPORTANT THAN FORM(OR NAME) IN WHICH FUNDS ARE LYING..

Sec 64 (iv) reads as follows:-

In computing the total income of any individual, there shall be included all such income(INTEREST) as arises directly or indirectly—

subject to the provisions of clause (i) of section 27, to the spouseof such individual from assets transferred(FUNDS)directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart.