Tax on senior citizen mother's account
Querist :
Anonymous
(Querist) 25 September 2011
This query is : Resolved
Dear Tax experts
My mother is senior citizen age 73 years. She has only pension of 4000PM. I have opened a joint account with her as she is primary holder. I am second holder, she has a PAN no. I have opened a FD of 20lakhs for her and interest goes for her expenses. This is my saving of 3 years after TDS deduction from my salary. Principle money belongs to me only. I have below queries
1. Tax liability on interest of 2lakhs will come to my mother or to me?
2. Should I gift this money my mother for her living for tax saving on interest.
3. Should I show this as interest free loan to my mother.
What is best as per IT rules, because all interest is spend on my senior citizen mother.
Thx
R.Ramachandran
(Expert) 26 September 2011
Pension Account can never be a joint account.
Therefore, what I understand is that when you have opened the FD for Rs. 20 lakhs, that was in joint account - your mother being a primary holder.
If you had not gifted that money to your mother but only made her Primary holder, then the interest will be treated as income in your hands and will be subject to tax accordingly.
Even if you gift that amount to your mother, then your mother has to pay income tax on the interest earned. Of course she will be in a position to take advantage of the enhanced limit of exemption available to her as a woman tax payer.
Whether the interest is going for the use of the senior citizen or not etc., will not be a consideration when it comes to the question of imposition of income tax or for that matter any other tax. Taxation laws does not concern with equity.
Guest
(Expert) 26 September 2011
While agreeing to the views of Shri Ramachandran, I may add further, if you try to show the huge amount as interest free loan to your mother, the assessing officer will be free to safely presume that you have done so just to evade tax on your part, which you would have been liable to pay on the income earned on account of interest due on the FD. So, the ITO will not hesitate to book you for tax evasion besides imposing heavy penalty.
Querist :
Anonymous
(Querist) 26 September 2011
It is not pension account. Its separate account.
I would like to gift this money to her. is gift deed to be registered or notrified.
Sailesh Kumar Shah
(Expert) 26 September 2011
There is no need be registered or notarised.
you have to do:-
1.Issue cheque/dd in favour of your mother.
2. Write letter to your mother that i am making a gift for rs.20 lacs and take the acceptance for the same.
Raj Kumar Makkad
(Expert) 26 September 2011
I am completely in agreement of Ramachandran & PS Dhingra.
prabhakar singh
(Expert) 26 September 2011
WHAT IS THE FUN IN SEEKING ADVICE AFTER AN ACTION ALREADY DONE???
WAS IT NOT POSSIBLE FOR YOU BEFORE DOING SHOW????
Is not now there a question how can your mother deposit such a huge money when she never had it and has no income for even her expenditure except the pension sum of merely 4000/=p.m.
1. Tax liability on interest of 2lakhs will come to my mother or to me?
ANSWER::In the present condition it must be shown on your own as your income to keep away from any shocking scrutiny by ITO.
3. Should I show this as interest free loan to my mother.????
ANSWER::Acting on this option may keep you in soup as doubted by Mr.Dhingra.
2. Should I gift this money my mother for her living for tax saving on interest.???
ANSWER::This may best work as moment,but taxes are not the only matters one should address when such kind of decisions have to be taken.There long term impact should also be taken in to account.
The moment you declare this money as gift to your mother,you ceases to own it and it is your mother who after declaration of gift,becomes its owner,and you become none of it,no concern at all.
Looking from this angle of legalities and rights involved,you should look what will happen when your mother dies living this sum as owner????
you have not stated how many brothers and sisters you have,i guess your father has passed as it is on his behalf and as dependent she might be getting pension.
So when your mother passes, not only you,but her all legal heirs shall become,entitled to share this money as her heirs,as of right even if you make your self her nominee,bank will pay you,BUT SURELY HER OTHERS HEIRS CAN ASK YOU TO DISTRIBUTE THIS MONEY AMONG THEM IN ACCORDANCE OF THEIR SHARES,WHICH THOUGH MAY BE GUARDED BY A TESTAMENT OF WILL,BUT THAT TOO IS OFTEN LITIGATED NOW A DAYS.
THEN WHAT A BEST COURSE MAY BE ???????
THE MY ANSWER IS THAT YOU SHOW IT AS LOAN TO HER BUT NOT INTEREST FREE RATHER ON A NOMINAL INTEREST OF SAY @ OF SAVING BANK,WHICH ITO WILL DIGEST HAVING REGARD TO RELATION BETWEEN YOU AND HER BEING THAT OF SON AND MOTHER.
BETTER VISIT A TAX CONSULTANT DISCUSS ALL ISSUES INCLUDING THOSE THAT MAY COME SURPRISINGLY BEFORE YOU AFTER HER DEATH,IF YOU CHOOSE TO GIFT,AS ANTICIPATED BY ME,ONLY THEN ACT.
IF THERE ARE HEIRS OTHER THAN YOU TO YOUR MOTHER WHO CAN SHARE ALONG WITH YOU ON HER DEATH AND YOU BELIEVE IN BUYING PEACE IN LIFE,THINK THRICE BEFORE USING OPTION OF GIFT.
MY GOOD WISHES ARE WITH YOU.
Shastri J.K.
(Expert) 26 September 2011
I'm agree with mr.R.Ramachandran & mr.PS Dhingra,
