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TAX FORUM: QUESTIONS & ANSWERS

No tax on gifts to children or parents

I have a doubt about the application of Sec. 56(2)(v), wherein “relatives” are defined under seven categories. In none of these categories, “parents” and “children” appear. If a parent gives money as gift to his children or a son/ daughter gives money gifts to either parents, should it be taxable?

The definition of relative under Explanation to Sec. 56 refers inter alia to “any lineal ascendant or descendant of the individual”. A parent is included in lineal ascendant, while son or daughter is included as a lineal descendant. Lineal ascendant would include a grandparent and lineal descendant should include a grand child. In fact, even ascendants or descendants of more than two degrees should also be included as ascendants or descendants in this definition.

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