Is There any Tax Liability on Receiving Rs.20 Lakh as a Gift From Parents?

Suppose your parents decide to gift Rs.20 lakh to you. Receiving this large amount from your parents can be both exciting and confusing, especially when it comes to understanding the tax implications. Will you have to pay tax on it if you accept this gift from your parents? Additionally, what are the steps you can follow to avoid unnecessary tax liabilities? Let us look at what the experts say regarding this.

According to a taxation adviser, gifts from parents are exempt from income tax under Section 56(2) of the Income Tax Act. This means that you do not have to pay any tax on your Rs. 20 lakh gift. However, it is suggested to get a gift deed that mentions the amount of the gift, the relationship with the person who gave you the gift and the fact that it cannot be taken back. The above suggestion is not mandatory, but it could be a good idea to keep a gift deed for your records for future reference. Getting the amount through a bank transfer can also serve as proof of payment. Since income tax returns are annexure-less, you don’t need to submit any documents.

Tax Liability on Receiving a Gift and Donating it to a Charity

Suppose you receive a large amount of gift from your father, and your father wants to donate it to a community hospital by your name. Is there any tax liability for either of the parties? Can you claim tax exemption if the donation qualifies for an exemption?

According to the provisions stated in Section 56(2)(x) of the Income Tax Act, any amount received as a gift from a relative, including a father, is exempt from tax. It means that neither you nor your father will have to pay any tax.

If you donate the gifted amount to a hospital, you might get a tax deduction, but for it, the hospital must be registered under Section 80G to qualify for your tax deduction. Section 80G of the Act allows deductions for contributions made to eligible charitable institutions, provided they are registered under Section 80G. The percentage of deduction depends on the category of the charity. If it’s a government or national relief fund, the deduction is 100% of the donation. In the case of other eligible charities, the deduction is 50% of the donation amount, but it cannot be more than 10% of the total adjusted income. To claim this deduction, you must make the donation using a cheque, bank transfer, or digital payment. If you donate more than Rs 2,000 in cash, you won’t be able to claim a deduction for that amount.

Also, it should be noted that the deductions made under Section 80G can only be claimed under the old tax regime and not the new one. Since the tax department might check your donation details, it’s suggested to consult a financial adviser before making the donation to ensure everything is done properly and you get the tax benefit.