How income tax rule implies on gifts given from PPF maturity amount?

• May 28, 2023
• CA Chandan Agarwal's Office

Income Tax Rules: A recipient of a gift is required to pay tax if the aggregate of all the gifts received during one financial year exceeds fifty thousand rupees in a year.

My daughter in-law wants to give a gift of ₹15 lakhs to her mother by withdrawing from her PPF account which is maturing. Will this transaction attract any tax liability for my daughter or her mother? Can her mother invest this amount in the Senior Citizen Saving Scheme as she is a senior citizen? Will this gift from daughter to mother, needs to be documented by way of a gift deed on a stamp paper and notarized before actual money is transferred from daughter account to mother account?

After abolition of the Gift Tax Act, the liability to pay tax on gift is on the recipient of the gift and the donor does not have any tax liability. A recipient of a gift is required to pay tax if the aggregate of all the gifts received during one financial year exceeds fifty thousand rupees in a year. So gifts upto fifty thousand rupees in aggregate in a financial year are not to be treated as income of the recipient but once the threshold of fifty thousand rupees is crossed full value of gift/s become taxable. There are certain exceptions to this rule of taxation of gifts. For example, gifts received from specified relatives including your children are not to be treated as the income of the recipient irrespective of the value of the gifts. So neither your daughter nor her mother will have any tax implication on this transaction of gifts.

Your wife can use or invest the money the way she wants. So she can invest the money in the Senior Citizen Savings Scheme as the scheme does not stipulate any conditions about source of funds for investments in the scheme.

There is no need for your daughter and her mother to execute any gift deed on a stamp paper. Your daughter can send a communication to her mother along with the cheque made out for the gift. What is required is that the intention of your daughter to give the money should be clear and her mother should accept the gift. Without acceptance of gift by the donee the transaction of gift is incomplete.

Source: https://www.livemint.com/money/personal-finance/how-income-tax-rule-implies-on-gifts-given-from-ppf-maturity-amount-11685164563766.html