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I am staying in Bangalore and am planning to send money to my in-laws staying in Delhi, which will be used by them to buy a car. Will they have to pay gift tax on the money transferred?

2006-07-01 23:04:02 · 3 answers · asked by Bangalore_TSB 1 in Business & Finance Taxes India

3 answers

First thing --There is no Gift Tax Act in India now.
Second the money given to your In-Laws shall also be tax free since gift to relatives are exempt from tax. My advice is -give money by cheque and better sign a gift deed registered with Notary stating that you are giving fit to such and such person who is relative and write the mode of transfer of money. That's it.

2006-07-03 04:57:50 · answer #1 · answered by q4tax 3 · 1 0

how much are you sending them?? If you send them $11,000 and your spouse sends them $11,000 (22,000) YOU do not have to file a gift tax form. The recipient never has to pay gift tax. The reference from www.irs.gov is below.
_____________________________________
IRS Tax Tip 2006-14

If you gave any one person gifts in 2005 that valued at more than $11,000, you must report the total gifts to the Internal Revenue Service and may have to pay tax on the gifts.

The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.

Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.

There are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit:
• Tuition or Medical Expenses that you pay directly to an educational or medical institution for someone's benefit
• Gifts to your Spouse
• Gifts to a Political Organization for its use
• Gifts to Charities

If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift.

For more information, get the IRS Publication 950, Introduction to Estate and Gift Taxes, IRS Form 709 or 709-A, United States Gift Tax Return, and Instructions for Form 709. They are available at the IRS Web site at IRS.gov in the Forms and Publications section or by calling 1-800-TAX-FORM (1-800-829-3676).

2006-07-02 09:58:38 · answer #2 · answered by Anonymous · 0 0

This for ur information that Gift Tax is abolished in India, but caveat that it may be treated as income in the hands of ur In-laws. Better would be to gift a car itself so that there is no tax incidence at all.

2006-07-02 23:04:07 · answer #3 · answered by The Guru® 5 · 0 0

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