I received Rs 1 lakh from my parents last month on my 19th birthday. I plan to invest this money. What will be the tax implications if I do so – on me and my father?
Any sum exceeding Rs 50,000 received during the financial year without consideration, is taxed
I received Rs 1 lakh from my parents last month on my 19th birthday. I plan to invest this money. What will be the tax implications if I do so – on me and my father?
Prabhat Kumar, Noida
It is heartening to note your desire to invest the money and not spend it on the latest gizmo, which is what seems to be the trend among most teenagers. For the purpose of taxation, any sum exceeding Rs 50,000 received during the financial year (FY) without consideration, is taxed under the head ‘Income from Other Sources’ in the hands of the recipient. However, when money is received from relatives, including parents, there is no tax implication in your or your parent’s hands.
There is a catch: the gains from the investments or savings that you make from this gift will be taxable in your hands, depending on the nature of the income that you receive. To avoid any complications in the future, do get the gift that you receive documented as evidence in the future if asked by tax authorities on the source or its veracity. If you were under 18 and had invested the money, clubbing provisions would be applicable, which means any income from the gift would be added and taxed in the hands of either of your parents, whose total income during the relevant financial year is higher.