Niece, Nephew Not Covered Under Definition Of Relatives Under Income-Tax Act, 1961

My brother-in-law’s son is a non-resident Indian (NRI). He wants to send my wife some money as gift from abroad. Will it be exempt from tax as it is from a relative or will she have to pay tax on it?

Answer: As long as the value of all gifts taken together during the year do not exceed Rs 50,000 in a year, the same are not to be treated as income of the recipient. Once the aggregate value of all the gifts received by a person during a year exceeds Rs 50,000, the full value of all gifts received are taxed in the hands of the recipient.

Your understanding about gifts from relatives being exempt is partly correct. Gifts from specified relatives only are not to be treated as income under Section 56(2)(x) of the Income-tax Act, 1961. Gifts received by a nephew and niece from their aunt or uncle are not to be treated as income for the nephew, as uncle and aunt are covered within the definition of specified relatives, but the reverse is not true. For the limited purpose of Section 56(2)(x), niece and nephew are not covered in the definition of relatives, and any gift received from them will be treated as income of your wife if the aggregate of all the gifts received by her during the year exceeds the threshold of Rs 50,000.

My mother has booked a flat, which is still under construction. Can I take this under-construction house on lease from my mother and claim house rent allowance (HRA) on it?

Answer: Under the provisions of Section 10(13A) of the Income-tax Act, 1961, a salaried individual can claim exemption in respect of rent paid for a residential accommodation occupied by him/her for the purpose of HRA received from the employer within the prescribed limits.

However, unless the house is habitable, one cannot take it on lease and claim HRA on the same. Occupation of an under-construction house is not possible, and if the same is detected by the income tax department, you carry the risk of disallowances, and along with it, risk being liable for tax, interest and penalty, too. For that matter, even the developer would not have given possession of such under-construction property. Also note that the benefit of HRA exemption is available only under the old tax regime.

I want to file my income tax return (ITR) under Section 44ADA of the Income-tax Act, 1961. The total amount paid to me by the organisation for the financial year 2024-25 was Rs. 15.58 lakh. The total tax deducted at source (TDS) was Rs. 1.55 lakh. What amount should I enter in the gross receipt column and what amount as presumptive income Under Section 44ADA of the Income-tax Act, 1961?

Answer: Not all professions are covered under the scheme of presumptive taxation as provided under Section 44ADA which allows the taxpayer to opt for 50 per cent or more of his/her professional receipts as income. Under Section 44ADA, certain individuals or a partnership firm engaged in specified professions prescribed under Section 44AA can opt for presumptive taxation scheme provided the gross professional receipts do not exceed the prescribed limits in the financial year.

Professionals, such as chartered accountants, engineers, architects, film artists, technical consultants, and medical professionals are covered under the presumptive scheme of taxation under Section 44ADA. So, if you do not fall under these categories, the provision of presumptive taxation as provided under Section 44ADA will not apply and, therefore, you cannot file your ITR under the said section.

The author is a tax and investment expert and can be reached on jainbalwant@gmail.com

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