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My daughter is a business woman currently. She started consultation and business from 18 years. Also before she turned 18 she had collected around 2.5 lakhs as pocket money from her relatives, and grandparents. She is currently 28 and when she was 26, she had 28 lakhs (6 lakhs received as gift from grand father, 2 lakhs received as gift from people on her wedding day and rest is money earned) with her, part of which she had put in the bank and withdrawn for some expenses, remaining kept it as cash at home.

On no previous year did her income go above the non taxable income bracket. From last 2 years she started filing income tax. Now she is investing this money which she had saved from childhood to build her business, a private limited company. Is any tax violation involved here. The gift is not documented, just given as cash.

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    Which country do you and your daughter live in? – Ben Miller Jun 4 '18 at 17:20
  • As it says lakhs, I'm going to guess that it is India, so tagging as such. – Brythan Jun 4 '18 at 17:44
  • @Brythan It’s a good guess, and you might be right, but there are several countries that use the word “lakh”. – Ben Miller Jun 4 '18 at 17:46
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Assuming India ...

Is any tax violation involved here

If you can establish / convince tax authorities there is no issue.

  • One can keep as much cash as required at home. There is no limit. One should be able to justify the source of this cash / income.
  • If the taxable income is less than the limit, there is no requirement to file ITR's. There are some exceptions, i.e. Foreign visit, purchase of property, etc that needs to be filed as ITR's even if the taxable income is less than limit.

Whether the income tax authorities will agree to your narrative it up to the tax authorities, Gift Deeds can be documented post facto as well. Can your grandparents show an equivalent withdrawal from Bank account for the Gifts made. The income your daughter has generated over 10 years, is there any paperwork to show the receipts and expenses. Is there any book keeping. If you have relevant paper work to back your narrative there is no issue, else the tax authorities may deem this as undeclared income and levy taxes and penalties.

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