Money Remitted As Gift To Parent In India Not Taxable As Income

I am working in Saudi Arabia. I want to send money to my father who has a savings bank account with an Indian bank in India. Will my father have to pay any tax on this money? Is there any rule that I have to send the money to my non-resident external (NRE) or non-resident ordinary (NRO) account only?

Answer: The monetary gift to your father will not be treated as income in India, as gift from specified relatives, including children, is outside the scope of provisions of Section 56(2) of the Income-tax Act, 1961, which provides for taxation of gifts at the hands of the recipient. That said, tax authorities could ask your father to furnish the source of your income to verify that the money sent by you is not a hawala transaction. Under the FEMA regulations, there are no restrictions requiring one to send money only to his/her own NRO or NRE account. One can remit money to anyone, even to non-relatives. 

My daughter is going to Australia on a work contract for four months. Where should she pay the income tax?  

Answer: The liability to pay tax on income earned outside India is dependent on the individual’s residential status for the year, which depends on the period for which one will stay in India during the financial year. Typically, you do not have to pay tax on your foreign income if your stay in India is less than 182 days in the relevant year, and you are a non-resident for tax purposes. Since the aggregate stay of your daughter in India will be more than 182 days for the financial year, she will have to pay tax in India on income earned by her in Australia. She will be able to claim benefit in respect of any tax deducted out of her income earned in Australia against her tax liability in India. It would be best if you seek the help of a tax professional to understand the tax implication under double taxation avoidance treaty between India and Australia. 

We are four members of a family and we are jointly purchasing a residential flat for Rs. 1 crore. We all will pay for it equally. Do we all have to deduct tax at source, as the individual contribution of each one of us will be less than Rs. 50 lakh, which is the threshold for deduction of tax at source on purchase of land and building? 

Answer: Under the provisions of the income tax laws on tax deduction at source (TDS) on sale of immovable property, the buyer has to deduct TDS at the rate of 1 per cent on the sale consideration in case the agreement value and/or stamp duty valuation or both of the property is Rs. 50 lakh or more. In case of joint owners, every joint owner will have to deduct TDS in the ratio in which they are paying for the property where the property value is Rs. 50 lakh or more even though share of each joint purchaser is less than the threshold limit of Rs. 50 lakh. 

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)