My relative sends me cash each month. How earnings tax is calculated?

Question: I’m 58 and out of job so my nephew sends me round 40k in direction of my month-to-month bills for repairs of my household. I’ve no different supply of earnings moreover the quantity saved in financial institution in the course of the tenure of my 20 years of service. Do I’ve to pay tax on the stated quantity acquired. Is it to be thought of as my earnings?

Answer: The recipient of items is required to pay tax underneath the tax legal guidelines and there’s no tax legal responsibility for the donor in respect of the items made by him regardless of the quantity of items made by him. Gifts acquired are totally tax free so long as the combination worth of the items acquired by a recipient from all of the sources in the course of the yr doesn’t exceed Rs. 50,000. Once the combination worth of the items exceeds the brink of fifty thousand, full worth of all of the items change into taxable within the fingers of the recipient.

However, items acquired from sure specified kinfolk are tax free with none higher restrict. Maternal and paternal uncles and aunt are lined throughout the definition of specified kinfolk. The exemption for items doesn’t work two methods on this relationship. Though the items acquired from maternal and paternal uncle and aunts are totally exempt within the fingers of niece and nephew however reward acquired from niece and nephew by the uncle and aunts taxable as niece and nephew should not lined throughout the definition of specified kinfolk.

Since the combination worth of reward acquired by you out of your nephew exceeds the brink of Rs. 50,000/- the complete quantity of items acquired by you throughout a yr out of your nephew can be taxable in your hand. In case your taxable earnings together with these items and after deductions obtainable doesn’t exceed 5 lakhs, you could have to pay any tax as a result of rebate of Rs. 12,500/- obtainable underneath Section 87A.

Balwant Jain is a tax and investments skilled and might be reached at jainabalwant@gmail.com

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