Follow up on Gift Tax Post – Clubbing of Income

by Manshu on November 25, 2012

in Tax

A few days ago Aashish Ramchand had a guest post here on income tax on gifts, and Manikaran Singal had the following comment on the post.

Manikaran Singal November 22, 2012 at 10:58 am [edit]

Just to add , Gift tax provisions has to be read in conjunction with the clubbing provisions which are detailed u/s 60-64 of income tax act 1961. These sections deal with the cases where tax payers make an attempt to reduce the tax liability by transferring / gifting their assets in favour of family members or by arranging their sources of income in such a manner that tax incidence falls on others, but in actual the benefit of income enjoyed by them. one needs a proper tax planning at every life stage by understanding tax provisions simultaneously. I’ve written a series of articles on tax planning at different life stages, hope it benefit the readers http://goodmoneying.com/tax-planning-2/tax-planning-tips-for-married-couple-with-kids.
Even one article on FPGI by me also throws light on this issue http://www.fpgindia.org/2012/11/spreading-the-income-golden-rule-to-save-tax.html

I thought this was a very useful comment as the original post talks about the tax implication of the gift tax money but then when you read about clubbing provisions, you get to know about the tax implications of the earnings arising out of the money that the gifted money generates.

This is an important thing and I think reading Mani’s gift tax post gives a very good perspective about the whole process of gifting and then the tax provision on the incomes arising out of that.

Gift Tax and Clubbing of Income

The main thing that stood out for me with respect to gift tax is that if you gift money to your minor child, spouse or daughter in law, and then they invest and earn more than Rs. 1,500 in a year then that income will be clubbed with your income and you will be taxed on it according to your tax rate.

Here is the whole post.

Spreading the Income: Golden Rules to Save Tax

Photo Credit: premier-photo.com

 

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{ 2 comments… read them below or add one }

Manikaran Singal November 25, 2012 at 9:28 am

Thanks Manshu, for writing a complete post around my articles.
The whole purpose of writing these articles to make people look beyond tax saving u/s 80C,80D etc. and use some other tax planning methods to reduce their overall tax outgo. Hope your readers will like it.

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Manshu November 25, 2012 at 9:36 pm

Thanks for pointing out those links in the last post Mani, I’m certain this will be of value to readers.

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