Other instruments which gets tax exemption

Other instruments which gets tax exemption

Cash gifts:

Cash gifts received from specified relatives are exempt from income tax, and there is no upper limit also. Similarly, cash gifts of any amount and from anyone received during your child birth, marriage or any other specified event are totally tax-free.

However, if you receive a cash gift of more than Rs 50,000 from a friend, you are required to pay tax on the excess amount exceeding Rs 50,000.

Charity:

You get a tax relief if you donate to institutions approved under Section 80G of the Income Tax Act. The rate of deduction is either 50 or 100 per cent, depending on the choice of fund.

There is no restriction on the amount of charity. However, donations must be made only to specified trusts. Also, only donations of up to 10 per cent of your total income qualify for such a deduction.

Money transfer:

If you invest in your wife’s or child’s (who is below 18) name, the income generated from such investments will be clubbed with your income and taxed accordingly.

However, if you transfer money to a child who is over 18 years of age and invest in his name, then the income generated from such investment will not be clubbed with your income. Instead, that will be clubbed with the income of your child and taxed accordingly.

Long-term capital gains:

If you invest in stocks, “you should sell them only after a period of 12 months to avail nil/ lower tax rate on long-term capital gains,” advises Sonu Iyer, Partner – Tax, Ernst & Young.

However, you are required to mention the amount of gain in your I-T return under the head ‘capital gains’ and claim exemption.