Gift tax

- It is totally exempt in the hands of father and father in law

- Draft a gift deed but the registration is optional

- In this case, clubbing provisions do not apply 

1. Gift Tax Exemption:
   The transfer of ₹50 lakh to your father and father-in-law qualifies as a gift to "relatives" under the Income Tax Act. Since both father and father-in-law are considered close relatives, the amount is exempt from tax in their hands, as gifts received from specified relatives are not taxable, regardless of the amount.

2. Gift Deed:
   Although it is not mandatory to draft a gift deed for online bank transfers between close relatives, it is advisable to create a gift deed to document the transaction clearly. This provides a legal record that the transfer is a gift and not a loan or payment for any services. Registration of the gift deed is optional in this case but could further strengthen your documentation, especially for higher amounts.

3. Clubbing Provisions:
   Clubbing provisions typically apply when a person transfers income or assets to a spouse or minor child. In this case, however, since the gift is being made to your father and father-in-law, the clubbing provisions do not apply. Any income generated by your father or father-in-law from the gifted amount will be taxable in their hands and not clubbed with your income.

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

As per the Income Tax Act, 1961, the transfer of money to relatives is not subject to tax under the gift tax provisions. A "relative" is defined in Section 56(2)(x) of the Act, and father-in-law (wife's father) is considered a relative under this section. Therefore, when you transfer money to your father-in-law, the amount is not taxable in his hands, and no tax liability arises on the gift.

Clubbing Provisions:

The clubbing provisions under Section 64 of the Income Tax Act, which typically apply to transfers between spouses or to a minor child, do not apply in the case of transfers to relatives like the father-in-law.

Therefore:

• 
  No clubbing of income: The income generated (profits) from the gifted amount will not be clubbed with your income. The income earned on the gifted amount by your father-in-law (if invested by him) will be taxed in his hands, not yours.

Summary:

• 
  Transfer to Father-in-Law: No tax is applicable as it qualifies as a transfer to a relative.
• 
  Clubbing Provisions: They do not apply to transfers to your father-in-law. The income generated from the gifted amount will be taxed in his hands, not yours.

In your scenario, where you're transferring money to your wife's account and planning to invest in an AIF (Alternative Investment Fund) Category 3, the clubbing provisions of the Income Tax Act, 1961 would still apply. Here's how:

1. Clubbing Provisions: As per Section 64 of the Income Tax Act, any income generated from assets transferred to a spouse without adequate consideration is clubbed with the transferor's income. So, even though the funds are being invested by your wife, the income (gains or profits) generated from this investment will be taxable in your hands, not hers.

2. Tax Deducted at Source (TDS) in AIF Category 3:

   • In the case of AIF Category 3 funds, taxes are indeed deducted at the fund level. The fund typically deducts the tax at source (TDS) on the income before distributing it to the investors.
   • Even though the tax is deducted at the fund level, the net income after taxes will still be considered as your income (due to the clubbing provisions) and will be required to be reported in your tax return.

3. Clubbing and TDS Interaction:

   • The tax deducted at source (TDS) does not negate the clubbing provisions. The TDS only means that taxes are prepaid on your behalf, but the income generated from the investment still belongs to you (as per the clubbing rule).
   • You will have to report the income in your tax return, and the TDS credit can be claimed to avoid double taxation.

For detailed, personalized advice, consider a phone consultancy.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

- Income arise from the gift amount will be taxable in the hands of husband. Income arise out of the income of the gifted property will be taxable in the hands of wife

- TDS will be deducted in the hands of wife and will reflect under her PAN. At the time of filing of the ITR, you can transfer TDS credit from her PAN to the PAN of husband

- Clubbing will apply irrespective of TDS deduction