Income Tax Rule for Relative: Can a father gift money to his son and daughter-in-law and will tax be levied on doing so? Similarly, when will tax be levied on gifts given between siblings?
New Delhi. Income tax rules are not considered so complicated without any reason. It is not easy to understand the provisions applicable in it without an expert. Now take the example of gift rules. Under this income tax rule, if a father gifts property to his son, then there will be no tax on it, whereas if the same money is given to the daughter-in-law, then there will be a tax liability on it. This provision of income tax has been made regarding giving and taking gifts between relationships.
Under this rule, the question is whether a father can gift Rs 20 lakh to his son and daughter-in-law to buy property. If a brother gives the same money to his sister or a sister gives it to her brother, then how will the tax rule apply on it. Under section 56(2)(x) of income tax, tax is determined on such amount. This income tax rule also applies to clubbing.
What are the rules for giving money to the son
Suppose a father has gifted Rs 20 lakh to his son or daughter-in-law to buy property, then the tax provisions on it depend on the nature of the transaction and the relationship between them. If this money is given without any specific purpose, then this amount will be considered as ‘income from other sources’ for the giver. However, if this amount is transferred to buy property and the son or daughter-in-law has used it to buy property for themselves, then under section 56(2)(x) of Income Tax, this amount will be considered completely tax free.
When will this amount be taxed?
If the father has given money to the son or daughter-in-law only for expenses, then the rule of clubbing will be applicable on it. This means that this amount will be added to the income of the donor. The government has implemented the rule of income clubbing because many people transfer their income to other family members to save tax. In such a case, the government has implemented the rule of income clubbing. Apart from this, if there is any income from the money given as a gift, then tax will be levied on that income amount as well.
What is the rule regarding brother and sister
This type of transaction between brother and sister is completely outside the scope of income tax. Under Section 56(2)(x) of the Income Tax Act, brother and sister are included in the definition of relative. Therefore, if a brother gifts Rs 20 lakh to his sister, then no tax will be applicable on it. Similarly, money given by the sister to the brother will also not be taxed, unless any taxable income is generated from that money. If this happens, then it will be added to the income of the person giving the money and tax will be levied.
