Got a gift? Now pay the tax

I would like to gift my dad Rs 1,00,000. Will he have to pay tax on this? Will he have to show this in his annual income tax return?

- Prahlad

No. The gift given to your father would not be covered for the purpose of income tax.

Hence, he need not show this as income.

It is true that gifts above Rs 25,000 will be taxed. But a gift from a blood relative (lineal ascendant or descendant) is exempt from tax, irrespective of the amount.

This would include gifts to spouses, parents, children as well as:
~ Brother or sister (and their spouse)
~ Brother or sister of the spouse of the individual (person making the gift)
~ Brother or sister of either of the parents of the individual
~ Any lineal ascendant or descendant (and their spouses) of the spouse of the individual

Do ensure a proper gift deed is executed.

A gift deed is a legal document that states how much you received, from whom and when.

The person making the gift and the one receiving must both sign the gift deed. Do get it registered with the related stamp duty.

• Expensive gift? You may be taxed.

I won a car (Maruti Alto Lxi) and a plasma TV in a game show featured on a leading private television channel.

They have asked me to pay TDS of about 33.66% of the car price. Is this right? The car price is Rs 3,23,131, which includes insurance, road tax and registration fees (to be paid by them).

Is it possible to pay tax just on the price of the car excluding the insurance and other expenses so that the TDS is less? Or is it better if the channel pays the inclusive amount and I pay just the TDS?

In short, how can I minimise the TDS or the amount to be paid?

Also in case of plasma TV, is there any provision to pay the TDS on the distributor price or will I have to pay it on the MRP only? 

- Shivani Zaveri

Two sections of the Income tax Act deal with this issue.

Section 56(2)(ib)
This section defines the scope of taxability of the winnings from such game shows.

Section 194B
This section defines the liability of the person responsible for giving the prize/ winnings. This is where the Tax Deducted at Source is dealt with.

In your case, the winnings are in kind (car and television) so the game show organisers would need to collect the TDS amount from you in the first instance. Which means, they have to do this before they release the prize/ winnings to you.

The applicable tax:

Flat rate = 30%
Surcharge = 10%
Education Cess = 2% of aggregate of tax and surcharge.

As the winnings do not exceed Rs 10 lakh (Rs 1 million), surcharge would not be applicable.

Hence, tax payable would be:

30% + 2% of 30% = 30.6% of the total value of prize money. This would include the insurance, etc, paid by the organiser.

In your case, you may be needed to pay the organisers an amount of Rs 98,878 towards tax.

In the case of the television, in our opinion, you could pay tax at the above mentioned tax rate on the value at which the organisers have purchased it.

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