No tax on gift to son-in-law

SC Vasudeva

Q I have deposited a sum of Rs1 lakh by cheque to LIC under a single-payment policy taken in favour of my married daughter. Please advise whether this payment would automatically become a gift to my daughter or some other formality is required to be completed.

How the maturity proceeds of the policy would be treated for income-tax purpose in her hands? Is she required to file an income-tax return, in case her income is less than the maximum amount which is not chargeable to income-tax? Kindly advise whether a sum of Rs 1 lakh given to my son-in-law as a gift would attract any tax on my or his hands. — Shankar Singh

Your queries are replied here under:

A. (I) It would be advisable to make out a letter with regard to the amount of Rs 1 lakh paid in the shape of single payment to LIC for a policy taken in favour of your married daughter. The letter should state that the payment of premium be treated as a gift to her. Your married daughter should make out a letter addressed to you accepting the said gift.

(II) The maturity proceeds of the policy would be treated as capital in her hand in case the premium payable does not exceed 20% of the actual capital sum assured. Since it is a single-premium policy, in all probability, the amount received in excess of premium would be taxable in your daughter’s hands as and when the policy matures.

(III) Normally, a person need not file a tax return in case his or her income does not exceed the maximum amount chargeable to tax. However, there are two exceptions to this general rule which are;

(a) A person who is claiming any deduction under chapter VIA (such as contribution to Public Provident Fund, payment of life insurance premium etc) or;

(b) A person who

(i) has deposited an amount or aggregate of the amounts exceeding Rs 1 crore in one or more current accounts maintained with a banking company or a co-operative bank; or

(ii) has incurred expenditure of an amount or aggregate of the amounts exceeding Rs 2 lakh for himself or any other person for travel to a foreign country; or

(iii) has incurred expenditure of an amount or aggregate of the amounts exceeding Rs 1 lakh towards consumption of electricity; or

(iv) fulfils such other conditions as may be prescribed.

(v) The gift made to your son-in-law would not attract any tax liability under the provisions of the Act.

Q. Please let me know the name of the fund which is exclusively used for the welfare of Indian military persons and the contributions made are 100% exempted from income-tax similar to the contributions made to the Prime Minister’s National Relief Fund. Also please give the address of the office where these contributions can be sent. — PC Garg

A. The names of the funds which are exclusively used for the welfare of the Indian military personnel are as under:

a) The Army Central Welfare Fund

b) The Indian Navy Welfare Fund

c) The Air Force Central Welfare Fund

These funds have been established by the armed forces of the country for the welfare of the past and present members of such forces or their dependents. The contributions to such funds are exempt to the extent of 100 per cent. The donations can be sent to the headquarters of the three Wings of the armed forces based in New Delhi.

Q. I am a retired Central Government servant aged 77 years. Kindly advise my total tax liability for the financial year 2019-20. My details are as under:

1. Gross pension (projected)

Rs 5,56,000

2. PPF deductions (actual)

Rs 1,00,000

3. Medical expenses i.e. cost of medicines and medical tests i.e. blood sugar, cholesterols, lipid profile, thyroid test (for my wife) etc. during 2019-20. (actual till date) Rs 25,000

4. Interest income on fixed deposits/savings accounts under section 80TTB Rs47,000

— PDS Sharma

A. On the basis of figures given in the query, your gross total income works out at Rs 6.03 lakh before allowing deductions under Section 80C, Section 80D and Section 80TTB of the Income-tax Act, 1961 (The Act). The amount of taxable income after allowing the permissible deductions would work out at Rs 4.31 lakh. Your total income therefore is not taxable after considering the rebate allowable under Section 87A of the Act. You will, however, have to file return of income as required under provisions of Section 139 of the Act since you are claiming deductions under Chapter VIA of the Act.