I am a housewife and do not have any income of my own. My father, who is an agriculturist by profession, wants to gift me ₹15 lakh. Please advise on what kind of document I need to get from him to prove that it is a gift. Though I have a PAN card, I have not filed tax returns till now since there is no income. Once I get the money from my father, I would like to invest it in bank fixed deposits.

R Naveena

Gifts by way of cash or cheque do not require an executed gift deed duly stamped and registered as per the Transfer of Property Act, 1882. A written/typed and signed documentation in a plain white paper mentioning the name of the people involved, the nature of relationship, the amount of gift being given and the reason for such gifting would suffice as a valid gift document.

Generally, any amount exceeding ₹50,000, received by way of gift by an individual without any consideration in a given financial year is liable to tax under the head ‘income from other sources’ in the hands of such individual as per section 56(2) of the Income-tax Act, 1961. However, if such a gift is received from a relative, it would be exempt even if it exceeds the maximum cap mentioned. Accordingly, the amount received from your father would be completely tax-free in your hands. But, the interest income that you would earn on the fixed deposits would be liable to tax subject to the basic exemption limit of ₹250,000. You have to file a tax return if your taxable income exceeds this threshold.

My daughter and 21 other youngsters, despite being on the merit list of private medical colleges in Maharashtra, were denied admission to the MBBS course a few years ago. After knocking at the doors of the Mumbai High Court, we approached the Supreme Court. In its judgment, as three years had passed since our plea was filed in the Mumbai High Court and admission could not be given at this late juncture, the Supreme Court told the Maharashtra Government to give cash compensation of ₹20 lakh to each of the 22 students. This money was duly received. Kindly advise how this amount is to be treated.

Ram Mankekar

The compensation amount received by your daughter takes the nature of entitlement to relief under public law damages. This entitlement cannot be classified as a revenue receipt as this does not arise from any existing employment undertaken or a business carried on by your daughter. It can be classified as capital receipt based on judicial precedents (for example, Eklingji Trust Vs. CIT[1986] 158 ITR 810 (Raj)) and the true intent of the compensation from the Government. Accordingly, the compensation money should, prima facie , not be taxable. However, you are advised to take a professional opinion on this aspect.

The writer is Partner, Deloitte, Haskins and Sells LLP. Send your queries to taxtalk@thehindu.co.in

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