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  • Tax Matters: How to gift money and property to children?

    Registration of the gift deed is required for transfer of immoveable property. Stamp duty payable varies and depends on the relationship between the donor and the recipient

    I am 80 years old and not keeping good health since the last few days. Hence, I want to give gift of Rs 1 crore each to my wife, two sons and a daughter, who is a non-resident. I also want to give an apartment to my non-resident daughter. How should I go about it? · — By S S, Dated 23/11/2019 A non-resident Indian (NRI) or person of Indian origin (PIO) can receive gift from a resident relative subject to the Reserve Bank of India (RBI) guidelines on remittance of funds outside India. Resident individuals are allowed to remit an aggregate sum of US $ 250000 per financial year under the liberalised remittance scheme as gifts without any approval of the RBI. With the passing of the Finance Bill, 2019, in parliament, Section 56(2) of the Income Tax (IT) Act, 1961, is also applicable on taxation of gift given by resident individuals to NRIs under the IT law. Only money paid by a resident individual without any consideration to a person outside India will be considered as taxable in the hands of the receiver. Person outside India is defined as non-resident or foreign company. The rule will not apply to your daughter as gift from specified relatives (father) are exempt from tax. The IT department scrutinises gifts, especially when their value is high. Therefore, it is important to prepare documentation in the form of ‘Gift deed'. A gift deed is a legal document describing the transfer of gift. Apart from the gift deed, it is also important for the donor to have proof of the source of funds to buy the gift. Registration of the gift deed is required for transfer of immoveable property. Stamp duty is payable. Stamp duty on gift deed varies from state to state and depends on the relationship between the donor and the recipient. It is 3% on the prevailing on the ready-reckoner rates on gift deed transactions in Maharashtra, when immovable property is being transferred to blood relatives. As you are not keeping good health, you should transfer the property under will so that there are no internal disputes in your family and the title is clear. Stamp duty on gift deed can also be saved. However, your daughter might have to pay inheritance tax as per the applicable laws in her country of residence. Your daughter must deposit the inheritance money in her ?(NRO) account. The balance in the NRO account up to US$ 1 million per financial year can be sent abroad. You can also give loan to your NRI daughter with a clause that it will be inheritance (non repayable) on your death. A resident individual can grant a rupee loan to an NRI relative by crossed cheque or electronic transfer as long as the loan is free of interest and the minimum maturity of the loan is one year. The loan amount should be within the overall limit under the liberalised remittance scheme per financial year available for a resident individual, who shall ensure that the applicable limit is not breached. The proceeds have to be utilized only for personal requirement or for the own business of the borrower. They should not be used for prohibited activities such as chit fund or Nidhi company, agriculture or plantation activities, in real estate business and trading in transferable development rights. Construction of farm houses is also not permitted. The restriction on real estate does not include development of township, construction of residential or commercial premises, roads or bridges. The proceeds cannot be used for investment or for on-lending. The RBI can, however, permit these borrowers to use the amount borrowed for on-lending to the infrastructure sector or to keep them in fixed deposits with banks in India, pending utilization for permissible end-uses. The loan amount should be credited to the non-resident ordinary (NRO) account of the NRI or PIO. The loan amount should not be remitted outside India. Repayment of loan should be made by inward remittances through normal banking channels or by debit to the NRO, non resident external (NRE) or foreign currency non-repatriable (FCNR) account of the borrower or out of the sale proceeds of the shares, securities or immovable property against which such loan was granted.   Recently I visited Tirupati Balaji. I saw lot of people donating large amounts in cash. Very few were donating by cheque. Which provisions of the income tax (IT) govern anonymous donations? — Bhupendra, e-mail Section 115BBC of the IT Act, 1961, defines anonymous donations as voluntary contributions. A person receiving such a contribution does not maintain a record of the donor. Paying the price

    Anonymous donation received is subject to tax under Section 115BBC of the IT Act, 1961.

    Paying the price
    Anonymous donation received is subject to tax under Section 115BBC of the IT Act, 1961
    Section Nature of entities
    10(23C)(iiiad) and (iiiae) Any university, educational institution or hospital, solely for non-profit purpose, where the aggregate annual receipts do not exceed Rs 1 crore.
    10(23C)(vi) and (via) Any university, educational institution or hospital other than those institutions referred above and approved by the prescribed authority.
    10(23C)(iv) Any fund or institution established for charitable purposes 
    10(23C)(v) Any trust or institution wholly for public religious purposes or wholly for public religious and charitable purposes.
    11 Any trust created wholly or partly for charitable or religious purposes.

    Anonymous donations are not taxable under Section 115 BBC of the IT Act if received by wholly religious institution or trust created for wholly religious and charitable purposes. However, if donation is received with a specific direction from the donor for its uses such as for deployment in educational or medical institutions run by such trust or institution, the amount of anonymous donation is subject to tax under Section 115BBC.

    Anonymous donation received by educational institutions or medical institutions covered under Section 10(23C) (iiiab) (iiiac) of the IT Act, wholly or substantially financed by the government, is not taxable. Political parties enjoying exemption under Section 13A of the IT Act are also outside the scope of Section 115BBC of the IT Act.

    Anonymous donations received by wholly charitable institutions will be taxed at 30% plus surcharge plus cess of the aggregate amount received is in excess of the higher of Rs one lakh or 5% of the total donations received by such institution.

    Any anonymous donations specifically directed towards a medical or educational institution run by partly charitable or religious trust or institution is subject to tax of 30% on the aggregate of anonymous donations received in excess of the higher of Rs one lakh or 5% of the total donations received by such institution.

    The residual income of the trust will be computed by reducing from the total income of the trust the anonymous donations that have been taxed at the rate of 30% and not the total anonymous donations received by the trust. While computing the taxable income of the trust or institution, the total voluntary contributions are to be reduced by the taxable portion of anonymous donations. The balance is to be utilized for the objects of the trust or institution for claiming exemption Section 11 or 10(23C) of the IT Act.


    Our private limited company has only two directors including me. Both of us are childhood friends. Hence, sometimes we tend to neglect maintaining and preserving records of our business activity. What are the repercussions?

    — By R&M dated 15/12/2018

    All documents of a company are categorized to be retained as documents whose preservation is permanent in nature and are not less than eight years after completion of the relevant transactions and those kept in electronic mode. Documents arising out of various litigations are to be preserved as per orders of the court or eight years after the conclusion of the litigation.

    Documents whose preservation is permanent include certificate of incorporation, memorandum and articles of association, other documents filed with Registrar of Companies at incorporation and register and index of members and debenture holders, if any, commencing from the date of the registration of the company. Agreements made with stock exchanges and depositories and minute books of the general body, board and committee, also have to be kept for posterity as per Companies Act, 2013. Registers of charges, contract, investments, share certificate, transfer and transmission, as per the Companies Act, 2013, are to be kept for posterity.

    Policies of the company framed under various regulations and register of preservation and disposal of records are to be permanently maintained. Files relating to premises such as title or lease deeds and related ledgers have to be preserved.

    Documents to be kept safety for eight years comprise instrument creating charge or modification from the date of satisfaction of charge, annual returns and all certificates and documents annexed, register of deposits, return and contract of allotment of shares from the date of each allotment, books of accounts and annual financial statements including annual accounts, directors' report, auditors' report, and all notices in Form MBP–1 received from directors and key management persons along with any amendment.

    Return of declaration of beneficial interest in any share, copy of newspaper advertisement or publications, compliance reports received from any statutory authority, postal ballot related papers or registers, disclosure or returns filed under the Securities and Exchange Board of India (Listing Obligation and Disclosure
    Requirements) Regulations, 2015, register of domestic and foreign debenture holders and proxies have also to be maintained for eight years.


    In 2018-19, our company did not provide depreciation on furniture under the Companies Act, 2013, in the books of accounts as the asset reached its residual value or useful life, as per schedule II of the Companies Act. However, our auditor wants us to provide depreciation on the asset value shown in the books. What is the treatment of residual value when an asset completes its useful life?

    — Dushyant, e-mail

    Depreciation is the systemic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset, or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use by an entity or the number of production or similar units expected to be obtained from the asset by the entity.

    When any tangible asset completes its useful life, as per schedule II of Companies Act, the company can write off written-down value (residual value) to statement of profit and loss (P&L). It can sell the asset. The difference is to be charged to statement of P&L. An asset is in active use is carried at written-down value, i.e., residual value, till the company counters any one situations from the above two.

    The replies are only in the nature of guidelines. The tax counsellors and the publication are not responsible for any decision taken by readers on the basis of the same.
    Readers may e-mail their queries on direct taxation to: tax-matters@capitalmarket.com

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Flash News 27-Mar-2023
  •  ( 9:59) IndusInd Bank appoints Vikas Muttoo as COO of BFIL  
  •  ( 15:49) Pharma shares outperform  
  •  ( 15:49) Sensex, Nifty end with limited gains  
  •  ( 14:44) Key barometers hit fresh intraday high; FMCG stocks edged higher  
  •  ( 14:26) HDFC board OKs raising Rs 57,000 cr via NCDs  
  •  ( 14:17) Mahindra Logistics, Ascendas-Firstspace to set up warehouse park in Pune  
  •  ( 13:37) Nifty above 17,000; European shares advance  
  •  ( 13:32) L&T wins large orders for power transmission & distribution business  
  •  ( 13:03) M&M acquires 7.67 crore shares of Mahindra Aerospace for Rs 31.47 crore  
  •  ( 12:57) FDC's API facility clears USFDA inspection  
  •  ( 12:35) J Kumar Infra JV bags LoA from BMC  
  •  ( 12:35) Sensex gains 344 pts, IT stocks advance  
  •  ( 12:30) Arvind SmartSpaces sells entire inventory of plotted development project in Bengaluru  
  •  ( 12:28) ISGEC Heavy Engg bags order from MAHAGENCO  
  •  ( 12:17) Paytm gets RBI extension for PA application resubmission  
  •  ( 11:39) Metal stocks edge higher  
  •  ( 11:39) Equity benchmarks pare some gains  
  •  ( 11:33) Crompton Greaves proposes merger with Butterfly Gandhimathi  
  •  ( 11:19) Manappuram Finance to consider fund raising via debt offering  
  •  ( 11:00) Dalmia Bharat arm to divest 42.36% stake in DBRL  
  •  ( 10:55) Morepen Lab Baddi facility clears USFDA inspection  
  •  ( 10:54) L&T Finance gets RBI nod for merger with its subsidiaries  
  •  ( 10:49) Rites JV bags Rs 122-cr order  
  •  ( 10:31) Deepak Fertilisers re-appoints Sailesh Mehta as chairman & MD  
  •  ( 10:19) Lupin gets USFDA nod for dyskinesia drug  
  •  ( 09:57) Grasim Inds buys 220-acre land in Gujarat for Rs 255 cr  
  •  ( 09:54) Sitharaman reviews state banks amid global financial scenario  
  •  ( 09:48) NBCC arm bags order from AIIMS for Rs 81 cr  
  •  ( 09:38) Market breadth in favor of sellers  
  •  ( 09:38) Sensex, Nifty trade sideways  
  •  ( 09:30) Zydus Life Ahmedabad facility gets three USFDA observations  
  •  ( 08:55) Sun Pharma to buy 60% stake Vivaldis Health for Rs 143 cr  
  •  ( 08:41) Asian stocks trading mixed  
  •  ( 08:29) RattanIndia's Revolt Motors opens 15 new dealerships  
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27 March 2023 00:00
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