What Precaustions Should One Take While Accepting Gifts From Relatives?

I m a govt employee in tax limits and filing my returns regularly. my wife is a housewife having PAN card but not filing returns as she is having no income. My father in law ( father of my wife) is a farmer and having only agriculture income . He does not have pan card nor he files return .Now question is—

1. my father in law wants to give cash gift of 2 lakh to me for purchasing a house? Can he do so?What will be tax liability of both of us in that case?

2. If he gives cash gift to my wife( his daughter) what will be tax liability of both?

3. What is better option of gift from tax point of view….should he give gift to me or my wife….?

I have already answered the general query regarding taxation of gift .I suggest you read When GIFTS are Exempt from income tax ?

Gift from relative is totaly tax free. This is provided in section 56(2) of the I T Act . Therefore, any gift received by you from your father-in-law is tax free irrespective of the amount you receive. So whether you or your wife who is daughter of your father-in-law receive gift from him , is totally tax free. Therefore from taxation point of view , it hardly matters whether you receive the gift or your wife receive.

 

 

 

Although the Income Tax Act has given exemption to gifts received from relatives, yet the Income Tax Department has all the powers to p-robe the genuineness of the gift. That is, the source of the fund will always be question.