Please advise on the taxability of income from amount gifted to a daughter.

If the gifted amount is invested in an FD, will the interest income be taxable in the hands of the father?

Or, if the gifted amount is invested in mutual funds, will the income from such funds be clubbed to father’s income?

Raju B

According to the provisions of the Income Tax law, where any sum of money exceeding ₹50,000 is received without consideration from any person, the whole of such sum is chargeable to tax as income from other sources.

Such sum, however, is not taxed in certain cases. For example, if any sum of money is received from any relative as defined in the relevant provisions, which include parents.

The gift received by your daughter falls under the definition of gift received from a relative. Hence, the same is not taxable in her hands.

Further, in case your daughter is a major, the income earned by her from investing such gifted money is her income and will, accordingly, be included in computing her taxable income. It will not be clubbed in your hands.

However, if your daughter is a minor, it will attract clubbing provisions.

Any income that arises or accrues to her from investment of the gifted amount shall be included in computing your total income.

This is on the assumption that your marriage subsists and your income is greater than your wife’s income.

I had taken VRS on July 5, 2015.  My employer has considered only exemption under Section 10(10c) and not under Section 89. How can I get the benefit of dual exemption?

Nayaz Ahmed

According to the provisions of Section 10(10C) of the Income Tax Act, 1961, (the Act), any amount received by an employee in accordance with the scheme of voluntary retirement on his retirement or termination of service shall be exempt, subject to certain conditions.

Further, the said Section provides that if an exemption is claimed under Section 89 of the Act, then relief under Section 10(10C) cannot be granted. A similar exclusive clause is mentioned in Section 89 as well.

The intention of the law is to provide exemption only once. Therefore, in your case, since your employer has already considered exemption under Section 10(10C), you cannot claim relief under Section 89 of the Act.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

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