Tax queries: Gifts from a relative defined under I-T act are tax exempt
Dilip Lakhani Senior Chartered Accountant, answers queries from our readers on income tax and other levies.
My younger sister’s son is working in the US for the past seven years as a software engineer. After my father’s demise, I had taken the responsibility for my sister. My nephew wants to send $50,000 as gift to me as I want to purchase a residential flat for my family. Is there any tax liability? Is there any issue with RBI?
Your nephew can remit the amount through banking channels to your bank account. This remittance is permitted under FEMA. You can declare the receipt of this amount as gift and the same will be incorporated in the inward remittance certificate, which will be issued by the bank. You will be liable to pay tax on the amount under Section 56 (2) of the Income Tax Act. Gifts received by an individual from his relative are tax-exempt. The word relative is defined under the Act. Your nephew will not fall with in the definition of relative. You will also have to prove the financial capacity of your nephew by taking confirmation and producing his bank statement. If the assessing officer is not satisfied about the capacity of the nephew, he can invoke Section 68 of the Act and levy tax at 60%.
I am a doctor practising in New Delhi. My gross receipt is Rs 45 lakh. I do not maintain my books of accounts. My expenses are about 30% of gross receipt. How do I file my return for FY17-18?
As you are not maintaining books of accounts, you can avail of the benefit under Section 44ADA of the Income Tax Act. Every professional can disclose 50% of the gross receipt as taxable income and pay tax on it. Every professional has this option if the total income is less than 50% of the gross receipt. If he wants to offer income less than 50% of the gross receipt, then he has to get his accounts audited. In your case the income is more than 50% of the gross receipt, and hence you will have to offer the income, which is worked out based on estimated accounts and which is more than 50% of the gross receipt.
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