CA Umesh Sharma
Arjuna (Fictional character): Krishna, Valentine’s Day (14th of February) is celebrated all over the world as the day of “Love.” Krishna, “Love” has a variety of related but distinct meanings in different contexts in the lives of Human Beings. When it comes to Love, it is obvious that we carry out monetary transactions and even lending and borrowing of money is done, but we have to be careful, proper planning should be made; so that one should not suffer like “Natsamrat”. Natsamrat is famous Marathi movie of Nana Patekar. Wherein Father gifted all his assets to loved children’s and then suffers. In the Context of Love of Natsamrat and Love on the occasion of Valentine’s Day, explain Love and gift with Income Tax provisions.
Krishna (Fictional character): Arjuna, Love is the root of all the things. The base of all the relationships like that of Husband-wife, Parents and children, friend circle and youth is “Love”. However, when feelings of greed, anger, jealousy interfere in a relation it ruins the relationship, as in the case of Natsamrat. In today’s world True Love is rarely found. Monetary Transactions carried out of Love and Affection may be taxable depending upon factors such as when, how and what type of gift is received and from whom they are received. They are called “love and affection” but there is no such specified term in Income Tax.
Arjuna: Oh, Great! So let us relate the journey of love in various stages of life with income tax provisions. Firstly, let’s see how youths fond of love, exchange gifts or money during the initial stage of falling in love, in this courtship period. So, are such gifts and money taxable?
Krishna: Courtship period is the golden period for the youths. However as per income tax and other laws they will be considered as husband and wife only after marriage. Income Tax does not consider the girlfriend –boyfriend relationship and therefore tax will be payable. Gifts given above Rs. 50,000 before marriage will be taxable in the hands of receiver. In this period everyone should be cautious while exchanging gifts. So keep in mind if tax planning is not done appropriately, expressing love might land you in paying taxes. During this period, make sure, while expressing love and happiness, any unwanted incident does not take place.
Krishna: Arjuna, marriage is the coming together of two people and their families. There is happiness all around and the couple’s journey of love starts from this stage. On the occasion of marriage all gifts received from anyone of any value are tax free. Husband-Wife come under the term Relatives as per Income Tax. But the list of gifts received with details should be maintained. Further expenses of marriage, honeymoon tour, etc. should be properly recorded. In the start of the relationship of husband and wife the obstacle of money or wealth should not arise. The couple should keep the ornaments received by the wife properly, as the wife is very affectionate about the things received from her family at the time of marriage. The feeling behind that should be taken care of. If the husband and wife make financial planning from the start then any financial obstacles will not arise in their relationship and life will be easier, similar to the Natsamrat’s wife who had retained her bangles. The Husband and wife should make investments in joint names. Further as per clubbing provisions of Income Tax Act, income derived from money gifted by one to other will be treated as the income of the giver. If the husband and wife are working at jobs or if they have their own business then different rules of income tax will be applicable to them and both of them will have to file separate income tax returns.
Arjuna: In the life after having children, how should the couple take care of the financial transactions?
Krishna: The real love of the family life begins after having children. Husband and wife after paying their own income tax should prepare their investments, deposits and portfolio. Further the couple should make planning of children’s education expenses, home loan EMI, life insurance premium, medical insurance premium and investment in public provident fund, etc. in such a way that income tax exemption will be taken and it will also help children in the future. Children need love from their parents but the life of children will be enlightened if parents make a strong financial base for children along with good education, thoughts and upbringing. Further after having children small arguements between the couple may take place. But planning should be made in such a way that a financial quarrel should not start and house hold expenses should be carried out properly. As per Income tax act deduction of tuition fees and educational loan is available. The Husband and wife can take deduction if these expenses are spent from their own earnings. Further, gifts given by father and mother to their children is tax free.
Arjuna: How should the Natsamrat and a husband and wife make arrangement for their old age after their children grow up?
Krishna: Listen Arjuna, with the mother and father’s love the children become adults and in search of love they tend to settle their family independently. This is the cycle of life. In the old age husband and wife should look after their health and financial earnings. In the old age, asking for money from anyone does not feel good. Therefore by saving money a plot or a house should be purchased under joint names because in the old age one needs help of the other. Due to the love and understanding between the husband – wife and insistence of grandchildren, life becomes easy at this age. The benefit of senior citizens is available after the 60 years of age. A situation like Natsamrat of, ”Koni ghar (house) deta ka? Ghar?” should not occur. Therefore, if a self-owned house is kept with the bank under the Reverse Mortgage Scheme, in the old age money will be received in monthly installments for daily needs and couple can live happily in their house. Like Natsamrat, we should not transfer our entire property in the name of our children.
Arjuna: In life, after husband and wife, the next relationship of love is with the friends and relatives. What about the transactions carried out with them?
Krishna: In income tax the definition of relatives is given, however the definition of friend is not given. A Person cannot make the selection of relatives but he can make selection of the friends. A Friend is a lovable person who also helps in difficulties. One should have friends like Natsamrat. There should be a good relation with the relatives but monetary transactions, gifts etc. should be done with due care. Tax is not levied on the gifts received from the specified relatives. Further the transaction of accessorial properties should be carefully done according to law. In the relation of friendship money should not become a hindrance. If transactions are incurred from the friends, as per the income tax act they will be taxable. It means if hand loan or advance is given to a friend the financial point of view interest income should be shown. Otherwise it may create problems as per the income tax. If a gift of more than Rs. 50,000/- received from a friend then it will be taxable.
Arjuna: On the occasion of the valentine’s day how should one keep the relation of love and money and what does Natsamrat teach us?
Krishna: On the occasion of valentine’s day as a symbol of love one must give gifts to his /her beloved ones. But love should not be valued with money. It means from the value of a gift one should not quantify love, because money creates greed and it spoils the relation. Love should be given from the heart and financial planning should be done from the brain. The things done for love are always beneficial than the things done from money. The Actual problem arises here itself. Man in the greed of money becomes ready to do anything by forgetting love. In the end, what a person does lovingly when he makes other lives happy and easy will last forever and not how much he has earned. There is a huge difference between Love for money and money for love. It is not wrong to earn money but only love for money is wrong. Love is tax free but this is not applicable for the one who has love for money. Natsamrat’s children went wrong here, because he had gifted his entire property to his children for love, but later he had to suffer many problems in his life because his children had love for money. What happened with Natsamrat should not happen with us, therefore, ”Tat dyava pan pat devu naye” means a person should gift his “Plate” but not his “Kitchen”.