Tax planning tip save your tax by giving gift

If you are major child of your parents and you earn negligible income then this tax planning tip will be helpful for you and your parents.(discussed in example 1)

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If you are major child of your parents and your parents are earning negligible income then also this tax planning tip will be helpful for you and your parents.(discussed in note 2)

As we all know that gift from relative is exempt (section 56)
But we also know that there are clubbing provision (section 64)


Now the question is that how can we save tax by reading section 56 and 64?

Ans. There are some ways to save tax by reading section 56 and 64 and  one of that way can be understood by reading  example which is discussed below-:

Example 1
If your father gave you cash gift of  rs. 20lakh 

Now, this 20lakh rs. will not be taxable in the hands of you (section 56)

BUT  if  you are minor then income earned from this 20lakh rs.(eg. interest earned by investing 20lakh rs.) will be clubbed in your father's income.(section 64) 

BUT if you are major, then income earned frm tht 20lakh rs.(eg. interest earned by investing 20lakh rs.) will not be clubbed with your father..(this is tax planning tip)

 Now,  you have got 2lakhs as seperate basic exemption limit 
If your father gives you 20lakhs rs. and you earn interest rs.1.90 lakhs on this 20 lakhs

Then rupees 1.90 lakhs will be considered your income 

Just think tht if your father had kept tht money with him thn his basic exmptn limit of rs.2lakhs will be filled from that 1.90 lakhs 

But but but if he gifts u 20lakhs rs. then his 2lakhs exemption limit will remain empty so tht he can use tht limit for other incomes wch he earns.

conclusion -:
If his total income after deductions is more thn 10 lakhs thn hurray he saved rs.57,000 tax and some  rupees of cess by doing this. 


 

Note -: 
1)Instead of Father your Mother can also give you cash gift tax implication will be same which is discussed above
2)Here if you earn more and your Mother's income is very low (.i.e rs. 50,000 in a year) then you can give her cash gift to make utilization of her basic exemption limit of rs.2lakhs or 2.5lakhs as the case maybe.
3)There are several other ways to save tax by reading section 56 and 64 that will be discussed later.
4)In the given example child can make utilization of deductions u/s 80c to 80u. or Money can be invested in PPF also(.i.e father can give amount more than 20 lakhs also).

Hope this will be helpful for many readers.


Giriraaj Vyas