Relatives — nephews and nieces are not excluded
Your answer in The Hindu dated June 9 that gift to nephew or niece may attract tax needs correction, since Explanation (iv) would cover such relationship.
Many readers have pointed out that the concurrence expressed for the reader’s view that nephews and nieces are excluded from the definition of relatives is not correct because Item No. (iv) of the Explanation defining relative includes “brother or sister of either of the parents of the individual”. Individual in the definition is the donee so that the brother or the sister of either parent being the maternal or paternal uncle could be the donor. Such gift would be exempt as a gift from a relative.
It follows that the children of a brother or sister would be the donees without attracting tax. It is only the lineal descendant that is the grand children of brother or sister could not be the donees. The answer in these columns in The Hindu dated June 9 would therefore stand corrected accordingly. The suggested amendment in the answer would, however, cover grand children of such brother or sister, but not in the definition, since lineal descendant of such brother or sister is not covered at present.
S. RAJARATNAM
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