My relative sends me money every month. How income tax is calculated?
Premium- Gifts received from certain specified relatives are tax free without any upper limit.
Question: I am 58 and out of job so my nephew sends me around 40k towards my monthly expenses for upkeep of my family. I have no other source of income besides the amount saved in bank during the tenure of my 20 years of service. Do I have to pay tax on the said amount received. Is it to be considered as my income?
Answer: The recipient of gifts is required to pay tax under the tax laws and there is no tax liability for the donor in respect of the gifts made by him irrespective of the amount of gifts made by him. Gifts received are fully tax free as long as the aggregate value of the gifts received by a recipient from all the sources during the year does not exceed Rs. 50,000. Once the aggregate value of the gifts exceeds the threshold of fifty thousand, full value of all the gifts become taxable in the hands of the recipient.
MORE FROM THIS SECTIONSee All
However, gifts received from certain specified relatives are tax free without any upper limit. Maternal and paternal uncles and aunt are covered within the definition of specified relatives. The exemption for gifts does not work two ways in this relationship. Though the gifts received from maternal and paternal uncle and aunts are fully exempt in the hands of niece and nephew but gift received from niece and nephew by the uncle and aunts taxable as niece and nephew are not covered within the definition of specified relatives.
Since the aggregate value of gift received by you from your nephew exceeds the threshold of Rs. 50,000/- the full amount of gifts received by you during a year from your nephew will be taxable in your hand. In case your taxable income including these gifts and after deductions available does not exceed five lakhs, you may have to pay any tax due to rebate of Rs. 12,500/- available under Section 87A.
Balwant Jain is a tax and investments expert and can be reached at jainabalwant@gmail.com
Never miss a story! Stay connected and informed with Mint. Download our App Now!!