Summary of this article
Senior citizens must pay tax if income exceeds exemption limit.
Gifts from relatives like father are tax-free, no disclosure.
Interest-free loans may lead to income clubbing with lender.
My father is a senior citizen and does not have any income. He invests money given by me in the stock market and earns profit from it. Does he have to pay any tax on those profits?
Every individual has to pay tax on income, irrespective of age, beyond the amount of basic exemption available. Since your father invests the money in the stock market, the profits will be taxed as capital gains or business income.
The profits earned by selling the shares within one year are taxed at a flat rate of 20 per cent and profits made after holding the shares for 12 months are taxed at 12.50 per cent. In case the same is treated as business income, the same shall be taxed at the applicable slab rate.
If the money given by you to him is treated as a gift, then there are no tax implications. However, if the money is given to him as an interest-free loan, the income tax department may club the income with your income under Section 80 of the Income-tax Act, 1961. So, you can either choose to charge interest on the money given to him if you treat it as a loan, or treat the money as a gift.
My father gifted me Rs. 10 lakh last year. Do I have to show this amount in my income tax return (ITR)? If so, where should I show it in my ITR?
Under Gift Tax Act, abolished long ago, the donor was required to pay tax on the gifts made during the year. Now the responsibility to pay tax on gifts has been shifted to the recipient under Section 56(2)(x) of the Income-tax Act, 1961.
Now, the recipient of a gift has to pay tax in case the aggregate of all the gifts received during a year exceeds Rs 50,000. There is no tax liability as long as the value of all the gifts received during the year are within the threshold of Rs 50,000. However, gifts received from certain specified relatives are outside the scope of this provision and are not treated as income. The relationship of the father is covered under this definition of relatives. So, the gift received by you from your father will not be treated as income, and, therefore, you do not need to disclose the same in your ITR either.
I am 65 years old. Though my gross income from pension is more than Rs 3 lakh, after deductions for home loan repayment, it comes to below Rs 2.5 lakh. Do I have to submit my ITR?
Under Section 139 of the Income-tax Act, 1961, a person is required to file his/her ITR if the total income before various deductions under Chapter VIA exceeds the exemption limit even if the taxable income after such deduction is below the exemption limit. As your gross income exceeds Rs 3 lakh, the basic exemption limit applicable to senior citizens, you have to file your ITR.
The author is a tax and investment expert and can be reached on jainbalwant@gmail.com.
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
