Gift from relative is tax-free

I want to know if the recipient of gift amount is free of income tax.

—RK Jain

Recipient of the gifted amount is not liable to pay tax on the amount so received provided the gift has been received from a relative. The term “relative” for this purpose means as under:

(i) In case of an individual: 

(a) spouse of the individual;

(b) brother or sister of the individual;

(c) brother or sister of the spouse of the individual;

(d) brother or sister of either of the parents of the individual;

(e) any lineal ascendant or descendant of the individual;

(f) any lineal ascendant or descendant  of the spouse of the individual;

(g) spouse of the person referred to in terms (b) to (f); and

(ii) In case of a Hindu Undivided Family, any member thereof.

My NRI son based in Australia wants to gift me Rs 10 lakh. My queries are as under: 

i) What are the formalities to be completed? 

ii) Can I invest this amount in property or FDRs in bank?

iii) I am a senior citizen and filing ITR regularly (non-taxable income). Please clarify whether this amount will be counted as my income. 

iv) If yes, should I show this amount in the ITR column “Income from other sources”?

— IL Verma

Your queries are replied hereunder:

• Your son can gift the amount through a letter which should indicate his bank account number from which the money is being transferred to you from Australia, his permanent address in that country and social security number, if any. The letter should preferably indicate details of his passport number, country from where it is issued and its expiry date. A copy of passport and his bank statement may also be obtained so as to prove the source of the gift which can be produced before the tax authorities in case any enquiry is made by the department in this regard.
• The amount so gifted should be accepted by you in the form of a letter. Once the gift is accepted it is complete and you can invest the amount so received for acquisition/ purchase of property or deposit in bank in savings or fixed deposit account.
• This amount will not be counted as your income as the same is exempt from levy of income-tax.
• The question of the amount received being shown under head ‘income from other sources’ therefore does not arise.