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Tax Tips for Lovers - Tell me "What do I need to know about taxes, gifts and love?"

We can't tell you much about love, but we can surely tell you about taxes and gifts.

First of all, the bad news….If you gift flowers or chocolates to your loved ones this Valentine's Day, it is unlikely that you can get a tax deduction on that!

Now for the good news…Lets consider the scenarios under which you can get tax benefits for gifts that you give to your spouse or loved ones.

If you make a gift in kind or cash to your spouse then it is not taxable in their hands. However, any income generated by the gift in kind or cash shall be treated as your income.

What if you give a gift to your fiance? The good news is that if you make a gift in kind to your fiance, then there is no tax implication. However, if you make a cash gift then restrict your gift to Rs.50,000. If the amount exceeds this limit, then the entire amount shall be added to the income of your fiance.

Good news again! No, gifts received on the occasion of your marriage shall not be taxable. There in no monetary limit attached to this exemption

If you transfer an asset, for example a house property, to your spouse, then any income accruing to your spouse from this asset shall be clubbed to your income and taxed in your hands.

But if you transfer the same house property to your fiance, and were to get married soon after the transfer, then even after your marriage any income accruing on this asset shall not be taxed as your income. This is because the marital relationship as husband and wife did not exist at the time of transfer of the asset.

Any gift in kind or cash is tax free in the hands of your parents and does not lead to any tax liability for you either.

We can't say if true love is leasing a car from your wife, but we can certainly tell you that you can get a tax benefit if your employer can structure your salary such that your company leases your car from your wife. Accordingly you can reduce your taxable salary by the lease rental amount.

Lets take an example. Shyam has a salary package of Rs.15 lakhs. He also maintains a car taken in name of his wife Radha, who is a housewife and has no major taxable income. Shyam can ask his employer to take his wife's car on lease, say for Rs.20,000 per month ,.i.e., Rs.2.4 lakhs per annum. This reduces Shyam's salary by Rs. 2.4 lakhs and accordingly he can save taxes on this amount.

The lease rental income shall now be taxable as Radha's income. She can claim car maintenance and running expenses against the rental income. Further, after applying her tax slab, her tax liability can be virtually reduced to zero.

Therefore, as a married couple Shyam and Radha have managed to save on taxes.

Tax Tips - Tell me…"What are the tax benefits of taking a home loan and owning property?"
www.iTrust.in 3 Feb 09 - Tax Tips Tell me "What are the tax benefits of taking a home loan ?
Do I need to file a tax return?

If you co-own a house with a spouse, and have taken a home loan for it, then each of you shall be entitled to separate tax deduction on account of interest and principal repayment.

For example, Nisha and Neeraj, a married couple, co-own a self-occupied apartment in Delhi in the ratio of 40% : 60%. Both pay EMI towards the loan they have outstanding on this apartment. Both shall be entitled to interest deduction and principal deduction in their individual tax returns in the ratio of their ownership.

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xyz said : 02/02/2010	Please update this section in view of the changes made with respect to taxation of gift receibed in kind from 1.10.09.