I contribute towards my father’s PPF. Will interest be clubbed with my income?
I am 25 and working. How will contribution made by my parents to my PPF account affect my income? I understand they can show this as a gift in their income statement while ITR filing. Do I have to show that amount as my extra income? Is there any limit for such gifts?
As per the Indian tax laws gifts received during a year is not treated as income as long as the aggregate of all the gifts received by a recipient during the year does not exceed fifty thousand rupees.
However, once the aggregate of all the gifts received during a year exceeds this threshold of fifty thousand rupees, full value of all the gifts is treated as income of the recipient without there being any basic exemption. Please note gifts received from certain specified relatives are outside the scope of this provision and the same not to be treated as income of the recipient even if the value of the gift exceeds fifty thousand rupees. Parents are covered within the definition of relatives for this purpose. So the contribution made by your parents to your PPF account will not be treated as your income. There is no limit upto which your parents can gift to you.
However, there is a limit of 1.50 lakh upto which money can be deposited in a PPF account taking your contribution and contributions made by your parents together. Even the interest received in your PPF account is also not subject to any clubbing provisions.
Since the money received by you in your PPF account is not to be treated as your income, strictly speaking you are not required to disclose it in your ITR. However, if you wish you can disclose this under the EI schedule.
As far as your parents are concerned they also need not show contribution made by them in your PPF account anywhere in their ITR and the same has to be treated as gift made by them. Moreover, your parents can claim deduction under Section 80C in respect of the contribution made by them in your PPF account even if you are a major and financially independent subject however to maximum of Rs. 1.50 lakh taking together other eligible items.
Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on Twitter
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