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Gifts received from relatives are not taxable
November, 29th 2018

Once you opt for computing income as per Section 44AD of the Income Tax Act, deduction for all the expenses including depreciation are deemed to have already been allowed and no further deduction is allowed. Therefore, you will not be eligible to claim further deduction of charges for services such as courier, broking, labour contractor etc. In case, you opt to declare an income lower than the deemed profit and gains being 8% of the total turnover or gross receipts as per Section 44AD, you will be eligible to claim deduction for these expenses over and above the other business expenditure eligible under Section 30-38 of the Act. In this situation, you will be required to maintain books of account and get the books of accounts audited under Section 44AB.

I am 80 an want to give a gift of Rs 30 lakh to my son. Please confirm whether my son has to pay tax of 30% on gift amount (Rs 30 lakh) or tax on income received on Rs 30 lakh? Will there be any tax liability on me? Should the gift deed be registered? I want to sell my ownership flat. If the sale realisation is less than ready reckoner value, what is the tax implication? I have joint mediclaim with my wife. Can I avail Rs 50,000 tax rebate under Section 80 D? —KISHOR SANGANI

A) Gift from specified relative is exempt from tax as per Section 56(2) of the Income Tax Act. Therefore, there will not be any tax liability on the gift of Rs 30 lakh received by your son. Also, there will no tax liability on you. Any income received on the gift amount will be taxable in the hands of your son. The gift will have to be supported by a gift deed, which is not required to be registered, however, please consider the issue of payment of stamp duty on gift of movable property.

B) Transfer of immovable property at value lower than the stamp duty value shall have tax implication. In such cases as per Section 50C of the Income Tax Act, stamp duty value will be considered as full value of consideration while computing capital gain. However, no adjustment will be made if the difference between stamp duty value and sales consideration is not more than 5% of the sale consideration.

C) As per Section 80D, medical premium paid for spouse is eligible for deduction. Therefore, you can claim deduction for Rs 50,000 paid for joint mediclaim premium.

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