In a recent ruling by Kolkata ITAT, it was held that gifts from Brother in law is tax free even if no formal deed was created.
The Income Tax Appellate Tribunal (ITAT) in Kolkata recently ordered in favour of a person, overturning a decision by tax authorities to add Rs. 80 lakh to his taxable income.
The assessee had received a substantial sum as a gift from his brother-in-law (sister & husband). While the gift was transferred through banking channels, tax officials had questioned the transaction, arguing that the transfer wasn't validly documented and that the source of the money was unclear.
The tribunal clarified that under the relevant section of the Income Tax Act (Section 56(2)(vii)), a sister & husband (a brother-in-law) is clearly defined as a relative & therefore such receipt is tax exempt.
However, it is recommended to maintain proper documentation like Gift deed, bank statements, gift confirmation and other supporting documents to establish the bona fide nature of the gift.
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