My wife’s brother in law ( her sisters husbund ) was holding a flat since 1995 and sold in year 2007. He has paid the capital gain tax as applicable in this transection. Now he wants to gift the amount received net of capital gain tax to my wife. My questions, – Will the brother in law be taxed again for gifting this amount to my wife ? – Will my wife be taxed for receipt of such gift amount ? – Can this amount be gifted by my wife’s sister to my wife ? My wife’s sister is earning. In such case will my wife be taxed ? – What would be documentation for this transection ?Ritwij K, Pune
First of all , you should know that there is no Gift Tax Act. Now there is provision under section 56(2)(vi) of the I T Act which explicitly makes the gift receipt in certain specific condition and from specific persons “tax free” in the hand of receiver . Clause (a) of the section 56(2)(vi) states that gift receipt from relative is “tax free” in the hand of receiver of the gift. Then there is Explanation given under the said provision which defines the word “relative” . The said provision 56(2)(vi) with Explanation is as under
(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006, the whole of the aggregate value of such sum:
Provided that this clause shall not apply to any sum of money received(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10;
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.
Explanation.For the purposes of this clause, relative means
(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi).]
It can be seen that as per Explanation to word”relative” , one of the person defined as relative is “Spouse of the person referred to in clauses (ii) to (vi) “ . That covers ” bother-in law ” of your spouse . So any gift received from his known source of income is tax free in hand of both him and your wife.There is no need for answer to your other question as the first option of getting gift by your wife from brother in law is perfectly legal and without any problem. Remember ,however, it will be better if the gift deed is made in favour of your wife .Go ahead ,get the gift and enjoy it!
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