Tax question: Does a mother pay taxes on the money received from her NRI son?


My son works in the Netherlands and sends me € 300 per month. My son pays taxes there on his salary. I sent him € 2,400 from India every month while he was studying in the Netherlands for almost two years. Is the money I get from my son each month taxable in India? My current income falls under the 20 percent tax bracket.


In accordance with the provisions of Section 56 (2) (x) of the Income Tax Act, 1961 (‘the Act’), income tax is payable on any sum of money (if the total value exceeds 50,000) received by an individual for no consideration. However, revenues from specified relatives (including the direct ascendant or descendant of the individual) would not be considered taxable. Therefore, a donation of money from your son (who is your direct descendant) will not be subject to tax in your hands in India.

I only have one folio with Sundaram MF which is the Diversified Equity Fund. The fund had declared a dividend of 725 yen and deducted tax at the rate of 20.8 percent. Raising the matter with them, they said the times, frequency and amount of declared dividends are not known in advance. They also stated that the investor’s investment horizon is unknown and the actual dividend income accrued for these TDSs cannot be assessed. The fund company also said that the 5,000 threshold limit has been aggregated to the PAN level in all AMCs and that Sundaram MF does not have investor-level data on dividends declared for each PAN during one year. Thus, they will deduct TDS from each declared dividend even without reaching the threshold of 5,000. In the event of a total TDS exceeding any investor’s actual tax liability, the investor may request a refund when filing tax returns. I think the explanation given by Sundaram is patently absurd. If all FCPs adopt this position and deduct tax regardless of the amount of the dividend, how sacred is the threshold of 5,000. In my opinion, they should aggregate the dividend under their plans only and deduct the tax if it exceeds 5,000 and not otherwise. Please give your informed opinion on this subject.

Cyril Dsouza

In accordance with the provisions of Section 194K of the Income Tax Act 1961 (the “Act”), payers (MF house in this case) are required to withhold withholding tax (TDS) at 10% for payments made to resident individuals. However, if the amount of such income paid during the financial year (EF) to the beneficiary does not exceed 5,000, it is not necessary to withhold tax at source. The literal reading of the section suggests that no TDS should be deducted by the payer if the amount paid by him in a fiscal year does not exceed 5,000. However, practically some payers consider that the threshold limit of 5,000 should be considered as an individual (ie at the PAN level) and that the TDS should be performed. In such a scenario, the individual would have to claim the credit for this TDS on the income tax return. It is also important to note that, in accordance with the provisions of section 206AA of the Act, in the event that you do not provide your PAN to the payer, the tax must be deducted at the rate of 20.8 percent (including the applicable tax). If this is true in your case, it may be a reason for the MF house to deduct tax at the rate of 20.8 percent.

The writer is a practicing accountant

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