The person who receives the gift from a relative does not have to pay tax on it. No matter what the value of this gift is. Section 56(2)(X) of the Income Tax Act defines a relative. According to this, if a person gives a gift to his daughter or granddaughter, then tax will not be levied on it.
Gifts received from certain relations are tax-free. In India, parents have a tradition of gifting their children. There are different tax rules on assets received as gifts. Deepak Mishra, a resident of Jaipur, wants to give a gift to his granddaughter instead of his daughter. He wants to know whether it will be taxed? Moneycontrol asked this question to tax expert and chartered accountant Suresh Surana.
Surana said that the person who receives the gift from a relative does not have to pay tax on the gift. No matter what the value of this gift is. Section 56(2)(X) of the Income Tax Act defines a relative. According to this, if a person gives a gift to his daughter or his granddaughter, then it will not be taxed. This means that if a gift of any amount is given to his granddaughter, then it will not come under the purview of tax for the granddaughter. Since this gift is given from the income which has already been taxed, the person giving the gift will also not have to pay any kind of tax on it.
He said, however, if the granddaughter is a minor, then as per the clubbing provision of section 64(1A), any income from the gifted funds will be added to the income of her parents. But, if the minor earns income by using her skills, talent or special knowledge, then it will not be added to the income of the parents. If Deepak Mishra gifts to his granddaughter instead of his daughter, then it will not be taxed.
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