4

My Salary in a FY is Rs.6,50,000. If I gift 50k to my Father who is retired but getting pension, will I get a 50k tax benefit? If Yes, then under which section would it be? 80C or other?

Secondly, if Father's income i.e. Pension+gift doesn't come under tax slab and he doesn't wish to invest in tax saving scheme would I still be getting benefit?

Edit:

I have been reading a lot on "How parents can help in reducing tax liability? I have come across this article/blog on http://www.jagoinvestor.com/2015/02/gift-tax-rules-in-india.html, which explains it (Trick #2).

enter image description here

So why example I quoted above doesn't help in tax saving?

5

If I gift 50k to my Father who is retired but getting pension, will I get a 50k tax benefit? If Yes, then under which section would it be? 80C or other?

There is no tax benefit for you on the 50K. This can't be deducted under any section. You have to pay tax.

if Father's income i.e. Pension+gift doesn't come under tax slab and he doesn't wish to invest in tax saving scheme would I still be getting benefit?

See above you do not get any tax benefit.

Other Notes:

  • This transfer between you and your father would come under gift tax act. As per gift tax, you can gift unlimited amount to your father and there is no tax for him. If you transfer anything above 50K to your friends, your friend is liable for gift tax.
  • If you father invests 50K, then the income [i.e. savings interest or gains from investing in shares], this would be treated as income to your father and taxed accordingly to his tax rate.

Edit:
Start from zero, you don't have any money. Say for the year 2015-2016, you get Rs 30 lacs salary. After deductions [PF, etc] you pay [say approx] Rs 10 lacs as tax. Now you have Rs 20 lacs. Assuming you survive on thin air and save Rs 20 lacs.

If you invest this 20 lacs into FD. For the year 2016-2017 you will get Rs 2 lacs as interest on 20 lacs. Plus you have salary of Rs 30 lacs. So now your total income is 32 lacs and your tax will go up by around Rs 60,000 [approx 30% of Rs 2 lacs].

Instead if you gift this Rs 20 lacs to your father, there is no gift tax for you or your father. Now your father invested this Rs 20 lacs in FD, he will get an interest of Rs 2 lacs. This can be tax free to him if he does not have any other income. If he has say an income of Rs 2.5 lacs, then he has to pay tax on the Rs 2 lacs at 10% ... Now he can gift you the Rs 2 lacs for 2016-2017 there is no gift tax to you or him.

  • Are you absolutely sure about it and is it still true with all new laws etc.? – hagrawal Jan 22 at 17:00

protected by Chris W. Rea Dec 1 '18 at 19:54

Thank you for your interest in this question. Because it has attracted low-quality or spam answers that had to be removed, posting an answer now requires 10 reputation on this site (the association bonus does not count).

Would you like to answer one of these unanswered questions instead?

Not the answer you're looking for? Browse other questions tagged or ask your own question.