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Taxability while gifting - very very urgent and important!!

Abhinandan Baid (CA Practice ) (113 Points)

08 September 2012

Mr X wants to gift Rs.50,000/- to Mrs.Z. MrsZ is the daughter of the Mrs.X's(i.e. Mr.X's spouse) sister. So whether MrsZ is covered under the definition of relative as per the Act?

Thanks

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4 Replies

CA Ruben Balooni (Professionalism ™) (1324 Points)
Replied 08 September 2012

No. Mrs. Z is not covered under the definition of relative. Hence the gift will be taxable in hands of Mrs. Z u/s 56(2)(vii)(a).

- Ruben Balooni

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Abhinandan Baid (CA Practice ) (113 Points)
Replied 09 September 2012

Hello ,

But as per the Act Son/Daughter of brother/sister i.e. Bhatija/Bhaitijior Bhagna/Bhanja are covered under the definition of relative.So similarly Son/Daughter of Spouse's Brother might be covered under the definition of relative. It is because the definition of relatives flows in the similar line pattern for a person for his family side as well as family side of his spouse.

I mean for Brother there is Brother in law (sala) from spouse family , own parents then there is parents in law is also covered from spouse family and so on .So my question is still unanswered that whether daughter of sister in law (Sali/Spouse's sister) is covered under definition of relatives or not ?

Thanks

CA Ruben Balooni (Professionalism ™) (1324 Points)
Replied 09 September 2012

@ Abhinandan Baid -> https://i.imgur.com/W90tQ.jpg

click on the above link and check the definition of "RELATIVE" as applicable for section 56(2)(vii).

- Ruben Balooni

Abhinandan Baid (CA Practice ) (113 Points)
Replied 09 September 2012

Hello Ruben,

Ur effort is appreciable . But your reply is mere bookish , the given case requires much more insight knowledge and experience . Kindly refer the given link :https://www.itatonline.org/articles_new/index.php/law-on-taxability-of-gifts-a-comprehensive-analysis/

The link will give you quite a good insight regarding the broad definition and understanding of relative and text is written by very renowned person in the subject .As per the link given by you Bhatija/Bhanja(son of Brother/Sister) is not covered under the definition of relative but link given by me clearly state that the are covered under the definition of relatives(please read text in the Quotes in the right hand side-"..the Income Tax Act does not recognise bilateral relations so far it appears from this example of Mama Bhanja. Similar situation will arise in case of Chacha- Bhatija. If Bhatija (Nephew) gets a gift from Uncle, it will be exempt but if an Individual (Chacha or Uncle) gets gift from his nephew or niece, it will not be exempt and will be taxed. We feel the relationship is mutual and therefore the CBDT needs to revisit the definition of relative for the above purpose")

So we need concrete answer (any case laws) in this regard

Thanks