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Taxability of gift and investment in ppf

Chirag (General Manager) (44 Points)

23 September 2013

Hello All,

Minor received Gift from Mother's Sister Rs. 80,000 and Mother's Father Rs. 60,000.

Minor wants to invest Rs. 1,00,000 in PPF and remaining Rs. 40,000 in FD.

Will Gift's received taxable in hand of minor ?

can minor invest the gift received in PPF ?

Taxability of Interest earned in FD ?

Please advise.

Thanks

Regards/Chirag

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7 Replies

CA Pooja Agarwal (Chartered Accountant) (3228 Points)
Replied 23 September 2013

the mentioned incomes will be taxable in the hand of the parent whose income is higher under the clubbing provisions

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Mihir (Wealth Manager) (5293 Points)
Replied 23 September 2013

Ms Agarwal is right. The deduction of Rs. 1500/- shall be available on income from minor taxable to parents.

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 23 September 2013

But the gift recieved from such relatives is exempted.., i guess.. And regarding that sister of mother, m sure its already exempted in the hands of reciever...

Just confirm with gift from father of mother.

Mihir (Wealth Manager) (5293 Points)
Replied 23 September 2013

The gift of 140,000/- is exempt, but the interest earned in PPF and FD shall be taxable to the parents. Therefore the sum 140,000/- is not an income but the interest earned thereupon is taxable with a deduction of upto 1500/-

Chirag (General Manager) (44 Points)
Replied 23 September 2013

Interest of PPF is exempt...so no addition to parents income...

Suppose, higher income earner parent is Mother and mother has invested 1,00,000/- in PPF of Mother (So PPF limit is over).. Now minor received gift of Rs. 1 lakh from Mother's father and the same is invested in PPF of Minor.

in my understanding NO Gift tax and no addition as PPF interest is tax free.

plz advise

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Mihir (Wealth Manager) (5293 Points)
Replied 23 September 2013

Yes, no gift tax and no tax on interest earned in PPF. Interest earned on FD shall be taxable to the mother, who is earning more. The parents can open a PPF in the minor's name with parent's name as the guardian to operate the account, and the parents may make the deposits each year in the account.